Analyst Research Report Snapshot

Title:

Jindal Steel & Power (JSP) - Qtr. Update - Dated - August 07, 2014

Price:

$46.00

Provider:

Axis Capital Limited

Date:

08 Aug 2014

Pages:

5

Type:

AcrobatPDF

Companies referenced:

JNSP.NS

Available for Immediate Download
Summary:

Jindal Steel and Power’s (Bloomberg: JSP IN) Q1 adj. PAT at Rs 4.2 bn was above our estimate of Rs 3.7 bn due to lower other expenses related to overseas operations (Rs 0.7 bn in Q1 vs. Rs 2.2 bn in Q4)  The company indicated all major capacities are now commissioned and the key priority of FY15 is to stabilize them in Q2 and then ramp up utilization to boost cash flow in H2  Recently-commissioned Tamnar-II's (2.4 GW) capital cost at Rs 48 mn/MW (vs. peers' capital costs at ~Rs 75 mn/MW) will be its key advantage in upcoming PPA bids. Coal linkage (for 50%), transmission and PPA (85% untied) are near-term bottlenecks The stock is Under Review due to uncertainty on captive mines and iron ore sourcing. Q1 highlights  Jindal Power (2.8 GW): Overall generation was 2.2 BU (+12% YoY) despite significant capacity addition. PLF of Tamnar-I (1 GW) was 97.7%, while that of Tamnar-II was low due to shutdown of 2 units of 600 MW. Q1 merchant realization at Rs 3.2/kWh (flat YoY and QoQ) was much below peers such as JSW (at Rs 4.3) due to transmission bottlenecks. Management has guided for resolution of transmission bottlenecks from Q3. Due to losses in recently-commissioned Tamnar-II, PAT declined to Rs 2 bn vs. Rs 3.2 bn in Q1FY14  Steel: Volumes were 737 kt (up 11% YoY). Pellet volumes, however, declined 79% YoY to 118 kt led by ongoing constraints in sourcing iron ore. The company has completed (a) revamp and modernization of Raigarh plant, (b) commissioning of Angul plant, and (c) commissioning of 2 mnt Oman steel plant during the quarter. We expect a gradual ramp-up in these capacities which should improve volumes in FY15 and FY16. Our steel volume estimates are 3.4 mnt for FY15 and 3.8 mnt for FY16 Regards, Bhavin Vithlani (Executive Director – Power & Cap Goods) bhavin.vithlani@axiscap.in; 91 22 4325 1144 Jagdishwar Toppo (Executive Director – Materials) jagdishwar.toppo@axiscap.in; 91 22 4325 1103 Nitesh Jain (Sr VP – Materials) nitesh.jain@axiscap.in; 91 22 4325 1145 Anup Kulkarni (Asst VP – Power) anup.kulkarni@axiscap.in; 91 22 4325 1120

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