21 October 2014
2QFY15 Results Update | Sector:
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Operating efficiencies continue to drive growth
JSTL posted a good set of numbers, driven by operating efficiencies and higher
volumes. Consolidated pre-tax profit before exceptional items grew 10% QoQ (and
35% YoY), in line with our estimate. Growth was driven by lower coking coal cost,
efficiency gains from higher coke oven and pellet utilization, offset partly by lower net
blended realization (-2% QoQ). Consolidated EBITDA grew 8% QoQ to INR28.1b,
helped by better performance at subsidiaries.
While sales growth (4% QoQ) was below our estimate on lower-than-expected
realization, EBITDA was ahead (up 6% QoQ to INR26.2b) on higher efficiency
gains. The coke oven plant operated at 73% utilization while the pellet plant
operated at 65% utilization.
Standalone sales volume grew 7% QoQ along with improvement in value add mix
to 33% (from 29% in 1Q). Auto sales grew 13% QoQ.
EBITDA for subsidiary businesses grew 28% QoQ, driven by improved profitability
at Coated Products (despite lower realization) and Amba River Coke.
It took an investment write-off of INR1.9b – INR1.6b for its investment in US plate
mill and INR0.3b for advances relating to de-allocation of coal blocks.
Auction of category-C iron ore mines in Karnataka is expected before March 31.
We believe JSTL is well positioned, with market leadership in flat products, timely
investment in value addition, and operating efficiencies. It is the strongest contender
for closed category-C iron ore mines in Karnataka, whenever they come for sale. The
stock trades at an undemanding EV of 6.1x FY16E EBITDA. Maintain
M.Cap. (INR b) / (USD b) 284.2/4.6
Financials & Valuation (INR Billion)
2015E 2016E 2017E
(SanjayJain@MotilalOswal.com); +91 22 3982 5412
(Dhruv.Muchhal@MotilalOswal.com); +91 22 3027 8033
Investors are advised to refer through disclosures made at the end of the Research Report.