Edelstar - JSW Steel Ltd.

30th July 2018 By Edelweiss

JSW, part of the USD8bn O.P. Jindal Group, was incorporated as Jindal Vijaynagar Steel JVSL). It began operations in 1999 with the commissioning of the first Corex‐2000 module in India (third in the world after Posco in South Korea and Isicor in South Africa), with a capacity to produce 0.8 mn tonnes of hot metal. In FY05, the company merged group company JISCO (Jindal Iron and Steel Company), which had a strong presence in downstream products such as CR and GP/GC products. In FY06, the company merged Euro Ikon, Euro Coke, and JSW Power and was renamed JSW Steel, transforming into an integrated steel manufacturer. In FY14, the company completed the merger of JSW Ispat. The current steel capacity of JSW Steel is 18mtpa.

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Key Highlights
  • The company is in a sweet spot as: 1) full impact of higher realisation (up INR3,000-3,500/t) will flow in; 2) coated products’ prices are expected to catch up; and 3) operating leverage benefits due to higher traction in long products.
  • We are upbeat on improvement in JSTL’s leverage ratios QoQ— net debt:equity at 1.68x and net debt: EBITDA at 3.32x.
  • Management maintained the guidance of sales at 15.5mt for FY18E and expects realization (particularly for longs) to remain buoyant given the traction from constructions sector.
  • Domestic prices are still at ~6-7% discount to international ones, hence there is a headroom for domestic players to increase prices further based on cost push factors.

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