Jindal Steel Power Ltd - NSE Steel Power Ltd ... sponge iron, semi-finished steel, power and ferroalloys. ... Ltd acquired Shadeed Iron Steel Co LLC (SISCO)

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  • CRISIL COMPANY REPORT | 1

    Jindal Steel & Power Ltd

    GICS Industry: Metals & Mining l Sub Industry: Steel l Website: www.jindalsteelpower.com

    NSE Ticker: JINDALSTEL

    Bloomberg Ticker: JSP: IN

    Face value / Share: 1.0

    Div. Yield (%): 0.20

    CMP (as on 13 May 2011Rs/share): 640.0

    52-week range up to 13 May 2011 (Rs) (H/L): 796.10/574.35

    Market Cap as on 13 May 2011 (Rs mn): 597,932

    Enterprise Value as on 13 May 2011 (Rs mn): 682,847

    Div. Yield (%): 0.0

    Shares outstanding (mn): 934.3

    Free Float (%): 41.6

    Average daily volumes (12 months): 1,375,080

    Beta (2 year): 1.2

    Key Stock Indicators

    Jindal Steel & Power Limited (JSPL) offers a wide range of steel products including large-sized

    parallel flange beams, 121 metre rails, coils and plates, sponge iron, semi-finished steel, power and

    ferroalloys. Its corporate office is located at Delhi. JSPLs plants are located at Raigarh

    (Chhattisgarh), Angul (Orissa) and Patratu (Jharkhand). Its machinery division is located at Raipur.

    KEY HIGHLIGHTS

    Capex continues in FY10

    As of FY10, the company is building a 2 mn tonnes per annum (MTPA) coal gasification and gas

    based DRI in Chhattisgarh, as well as steel making facilities of 3 MTPA capacity, and a 540 MW

    power plant. In Orissa, the company is setting up a 6 MTPA integrated steel plant at Angul in a

    phased manner. Of the 4,331 acres required for the project, 4,000 acres have been acquired. The

    first phase of the integrated steel plant is expected to be commissioned by 2012. The company is

    also setting up a captive power plant of 810 MW at Angul. At Patratu in Jharkhand, the company is

    setting up a 3 MTPA integrated steel plant that will have two rebar mills of 1 MTPA each, a wire rod

    mill of 0.6 MTPA, coke oven of 1.5 MTPA, a sinter plant of 4.27 MTPA and a blast furnace of 3

    MTPA. The first unit of the wire rod mill was commissioned on March 29, 2010. Also, the company

    has decided to establish 16 wind mills of 1.5 MW each in Satara (Maharashtra).

    Foreign forays in FY10

    JSPL acquired five oil & gas blocks in Georgia. The company has signed an MoU with the

    Government of Georgia for exploration and production of the blocks. JSPL also invested Rs 105 bn

    in Bolivia in FY10 for mining and setting up an integrated 1.7 MTPA steel plant, a 6 MTPA sponge

    iron plant, a 10 MTPA iron ore pellet plant and power plants of 450 MW capacity. In May 2010,

    JSPLs subsidiary Jindal Steel & Power (Mauritius) Ltd acquired Shadeed Iron & Steel Co LLC (SISCO)

    at Oman. SISCOs 1.5 MTPA gas-based hot briquetted iron (HBI) plant is under commissioning and it

    started trial production of HBI in December 2010.

    Expanding export presence

    JSPL has expanded its steel, power and mining businesses to various parts of the world, particularly

    in Asia, Africa, South America and Australia. The company has added new destinations for its

    products such as Nepal for semis, plates, beams and wire rods, Brazil for rails, Sri Lanka for semis

    and beams and South Africa and Kenya for beams.

    KEY RISKS Intense competition from foreign players can jeopardise competiveness and sustainability

    Cheaper imports from China and Ukraine will make steel industry vulnerable

    Volatility in raw material prices coal, iron ore, etc

    Increase in power and fuel cost puts pressure on margins

    YTD 1-m 3-m 12-m

    JINDALSTEL -10 -6 -1 -4

    NIFTY 4 -7 1 6

    Returns (%)

    Note:

    1) YTD returns are since Apr 01, 2010 to May 13, 2011.

    2) 1-m, 3-m and 12-m returns are up to May 13, 2011

    Mar-08 Mar-09 Mar-10

    Revenue (Rs mn) 54,868.4 109,224.0 111,131.2

    EBITDA margins (%) 44.3 49.4 53.6

    PAT (Rs mn) 12,745.3 31,267.1 36,484.2

    PAT margins(%) 23.2 28.6 32.8

    Gearing (x) 1.9 1.2 0.8

    EPS (Rs/share) 82.8 202.1 39.2

    PE (x) 25.0 6.0 16.3

    P/BV (x) 8.5 2.7 5.7

    RoCE (%) 20.2 34.2 28.5

    RoE (%) 40.5 58.4 41.9

    EV/EBITDA (x) 15.7 4.8 11.4 n.m.: Not meaningful

    Promoter

    58.4%

    FII

    23.4%

    DII

    6.1%Others

    12%

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    Volumes (RHS) JINDALSTEL NIFTY

    Indexed price chart

    Shareholding (As on March 31, 2011)

    Key Financial Indicators

    Stock Performances vis--vis market

  • CRISIL COMPANY REPORT | 2

    Jindal Steel & Power Ltd

    BACKGROUND

    JSPL has business interests in steel production, steel products, power generation, mining, sponge iron, ferrochrome and heavy machinery. The company makes hot rolled

    parallel flange beams and columns, rails, channels, plates, cathode bar and continuously cast products such as billets/ blooms, beam blanks, rounds and slabs and metallic

    and ferroalloys. JSPL got listed on the BSE in December 1999. The company has three divisions i.e. iron & steel, power and others. In FY10, iron & steel contributed ~61% to

    total revenue, power contributed ~38% and others contributed ~1%.

    At of FY10, the company had installed capacity for 1.37 mn tonnes of sponge iron, 2.4 mn tonnes of mild steel, 36,000 tonnes of ferroalloys, 353 MW of power, 1.5 mn

    tonnes of hot metal/ pig iron, 750,000 tonnes of rail and universal beam mill, 1 mn tonnes of plate mill, 45,000 tonnes of fabricated structures, 11,500 tonnes of machinery

    & castings, 30,000 tonnes of ingots, 3,000 tonnes of CF castings and 4.5 mn tonnes of pellets. Its subsidiaries include Jindal Minerals & Metals Africa Ltd, Jindal Power Ltd,

    Jindal Power Trading Co Ltd, Jindal Steel & Power (Mauritius) Ltd, Jindal Steel Bolivia SA and Urtan North Mining Co Ltd.

    COMPETITIVE POSITION

    Peer Comparison

    Jindal Steel &

    Power Ltd

    Steel Authority

    Of India Ltd. JSW Steel Ltd

    Hindalco

    Industries Ltd

    Mar-10 Mar-10 Mar-10 Mar-10

    Revenue (Rs mn) 111,131.2 410,676.2 190,387.5 607,336.0

    EBITDA margins (%) 53.6 25.1 22.0 13.9

    PAT (Rs mn) 36,484.2 68,464.6 15,087.2 38,142.0

    PAT margins(%) 32.8 16.7 7.9 6.3

    Gearing (x) 0.8 0.5 2.1 1.6

    EPS (Rs/share) 39.2 13.1 60.8 19.9

    PE (x) 16.3 12.1 15.4 9.9

    P/BV (x) 5.7 1.8 2.9 2.6

    RoCE (%) 28.5 21.6 11.2 14.4

    RoE (%) 41.9 21.2 20.4 33.6

    EV/EBITDA (x) 11.4 5.8 9.2 7.0 n.m: Not meaningful

    FINANCIAL PROFILE

    Top line growth peters out in FY10 as volumes drop, EBITDA margin jumps

    JSPL registered strong revenue growth of ~42.32% CAGR during FY08-10, with

    revenue growing from Rs 54.86 bn in FY08 to Rs 111.13 bn in FY10. Year-on-year in

    FY10, however, top line grew just ~1.7% as export and domestic volumes of steel

    products dropped over FY09. Power segment revenues rose ~18% over FY09,

    supporting top line.

    EBITDA margin increased by 420 basis points to 53.6% on account of decrease in

    material and marketing cost over FY09 as percentage of sales.

    PAT grew ~16.7% to Rs 36.5 bn from Rs 31.26 bn in FY09. This was on account of

    higher operating profit and increase in non-operating income coupled with lower

    foreign exchange loss of ~Rs 171 mn in FY10 compared with forex loss of ~Rs 1.43 bn

    in FY09.

    Units Mar-08 Mar-09 Mar-10

    Revenue Rs mi l l ion 54,868.4 109,224.0 111,131.2

    EBITDA margins Per cent 44.3 49.4 53.6

    PAT Rs mi l l ion 12,745.3 31,267.1 36,484.2

    PAT margins Per cent 23.2 28.6 32.8

    Revenue growth Per cent 54.9 99.1 1.7

    EBITDA growth Per cent 70.1 121.9 10.5

    PAT growth Per cent 80.7 145.3 16.7

    Gearing Times 1.9 1.2 0.8

    RoCE Per cent 20.2 34.2 28.5

    RoE Per cent 40.5 58.4 41.9

    Key Financial Indicators

    INDUSTRY PROFILE Steel Alloy

    In the last few years, applications of alloy steel have been increasing in consumer products such as consumer durables and automobiles. Use of alloy steels has enabled the

    industry to make light-weight machinery, thus making them energy efficient. The automobile industry is the largest consumer of alloy steel. In 2009-10, Indias consumption

    of alloy steel increased by 9.6 per cent over 2008-09. The automobile and auto components sectors consume around 70 per cent of the alloy steel produced in India. In the

    auto component sector, around 60 per cent of the total demand is derived from automobile original equipment manufacturers (OEM). In 2009-10, production of cars, utility

    vehicles and two wheelers is estimated to have grown by 25 per cent and that of commercial vehicles is estimated to have grown by around 36 per cent. Additionally,

    production of the auto components is also estimated to have grown by 10-11 per cent y-o-y in 2009-10.

    Sponge iron

    In India, mini-steel plants that produce long products are the primary consumers of merchant sponge iron. The sponge iron industry is highly fragmented with numerous

    unorganised small players and only a few large organised players. The low cost involved in setting up a sponge iron unit makes it easier to put up smaller units, leading to

    fierce competition. India is the largest sponge iron player in the world, producing 22.99 million tonnes in 2009-10. India uses more sponge iron, mainly on account of ample

    availability of iron ore and non-coking coal and also due to less availability of scrap. In developed countries, scrap is more popular than sponge iron for steel production

    considering it consumes less power and the yield is also higher. Between April-December 2009, sponge iron demand in India grew by 6 per cent (y-o-y) to 17 million tonnes

    (20 million tonnes in 2008-09) following improvement in demand for long products (which grew by 8-9 per cent).

  • CRISIL COMPANY REPORT | 3

    Jindal Steel & Power Ltd

    ANNUAL RESULTS

    Income Statement Balance sheet

    (Rs million ) Mar-08 Mar-09 Mar-10 (Rs million ) Mar-08 Mar-09 Mar-10

    Net Sales 54,299.7 108,689.2 110,633.6 Equity share capital 154.0 154.7 931.2

    Operating Income 54,868.4 109,224.0 111,131.2 Reserves and surplus 37,230.9 69,466.1 103,666.0

    Tangible net worth 37,384.9 69,620.8 104,597.2

    EBITDA 24,306.2 53,945.3 59,615.3 Deferred tax liablity:|asset| 4,946.7 7,170.3 8,454.7

    EBITDA Margin 44.3 49.4 53.6 Long-term debt 59,967.5 60,253.8 63,997.8

    Short-term-debt 10,003.2 20,889.3 22,045.1

    Depreciation 4,814.1 9,659.6 10,025.5 Total debt 69,970.7 81,143.1 86,042.9

    Interest 4,423.6 6,968.5 5,195.5 Current l iabilities 13,715.9 21,900.5 30,377.4

    Other Income 446.7 1,043.6 1,199.8 Total provisions 1,085.3 2,146.0 2,771.9

    Total liabilities 127,103.5 181,980.7 232,244.1

    PBT 15,426.3 39,306.6 45,673.1 Gross block 78,978.8 116,175.5 131,437.7

    PAT 12,745.3 31,267.1 36,484.2 Net fixed assets 101,252.4 136,738.8 186,215.2

    Investments 2,747.3 5,189.0 3,682.0

    PAT Margin 23.2 28.6 32.8 Current assets 23,103.8 40,053.0 42,346.9

    Receivables 3,549.6 5,741.1 7,533.2

    No. of shares (Mn No.) 154.0 154.7 931.2 Inventories 9,960.7 12,402.7 14,308.2

    Cash 6,207.2 6,693.6 1,127.7

    Earnings per share (EPS) 82.8 202.1 39.2 Total assets 127,103.5 181,980.8 232,244.1

    Cash flow Ratio

    (Rs million ) Mar-08 Mar-09 Mar-10 Mar-08 Mar-09 Mar-10

    Pre-tax profit 15,515.2 38,360.8 45,594.1 Revenue growth (%) 54.9 99.1 1.7

    Total tax paid -1,884.7 -5,815.9 -7,904.5 EBITDA growth(%) 70.1 121.9 10.5

    Depreciation 4,814.1 9,659.6 10,025.5 PAT growth(%) 80.7 145.3 16.7

    Change in working capital -3,357.0 -7,217.5 1,243.0

    EBITDA margins(%) 44.3 49.4 53.6

    Cash flow from operating activities 15,087.6 34,987.0 48,958.1 Tax rate (%) 12.2 14.8 17.3

    Capital Expenditure -23,014.2 -45,786.5 -59,756.1 PAT margins (%) 23.2 28.6 32.8

    Investments and others -1,658.2 -2,441.7 1,507.0

    Dividend payout (%) 4.9 2.7 3.3

    Dividend per share (Rs) 4.0 5.5 1.3

    Cash flow from investing activities -24,672.4 -48,228.2 -58,249.1 BV (Rs) 242.8 450.0 112.0

    Equity raised/(repaid) 0.0 140.3 186.5 Return on Equity (%) 40.5 58.4 41.9

    Debt raised/(repaid) 15,600.5 11,172.4 4,899.8 Return on capital employed (%) 20.2 34.2 28.5

    Dividend (incl. tax) -725.7 -1,000.3 -1,398.6

    Others (incl extraordinaries) -69.0 3,415.1 37.5 Gearing (x) 1.9 1.2 0.8

    Interest coverage (x) 5.5 7.7 11.5

    Debt/EBITDA (x) 2.9 1.5 1.4

    Cash flow from financing activities 14,805.8 13,727.5 3,725.2

    Change in cash position 5,221.0 486.3 -5,565.8 Asset turnover (x) 0.8 1.1 0.9

    Opening cash 986.1 6,207.2 6,693.6 Current ratio (x) 1.0 1.0 0.7

    Closing cash 6,207.2 6,693.6 1,127.7 Gross current assets (days) 154 134 124

    n.m : Not meaningful;

    QUARTERLY RESULTS

    (Rs million) Dec-10 % of

    Revenue

    Dec-09 % of

    Revenue

    Sep-10 % of

    Revenue

    Dec-10 % of

    Revenue

    Dec-09 % of

    RevenueNo of Months 3 3 3 9 9

    Revenue 31,827.0 100.0 27,074.4 100.0 30,858.3 100.0 92,784.5 100.0 79,459.3 100.0

    EBITDA 16,074.0 50.5 14,714.1 54.3 15,054.2 48.8 46,865.5 50.5 44,190.3 55.6

    Interest 812.6 2.6 1,074.6 4.0 781.8 2.5 2,455.8 2.6 3,052.8 3.8

    Depreciation 2,925.9 9.2 2,539.2 9.4 2,730.5 8.8 8,165.5 8.8 7,423.9 9.3

    PBT 12,335.5 38.8 11,100.3 41.0 11,541.9 37.4 36,244.2 39.1 33,713.6 42.4

    PAT 9,511.0 29.9 8,743.5 32.3 8,942.4 29.0 28,023.1 30.2 26,711.8 33.6

    Profit and loss account

  • CRISIL COMPANY REPORT | 4

    Jindal Steel & Power Ltd FOCUS CHARTS & TABLES

    Jun 2010 Sep 2010 Dec 2010 Mar 2011

    Promoter 58.4 58.4 58.4 58.4

    FII 22.7 23.7 23.8 23.4

    DII 2.8 2.5 2.3 6.1

    Others 16.1 15.4 15.5 12.0

    Shareholding Pattern (Per cent)

    Director Name Designation

    Savi tri Devi Jinda l (Ms.) Non-Executive Chairperson, Promoter-

    Director

    Vikrant Gujra l (Mr.) Group Vice Chairma n & Head-Global

    Ventures

    Naveen Jindal (Mr.) Executive Vice Chairman, Managing

    Director, Promoter-Director

    Anand Goel (Mr.) Jt.Managing Director

    Sankaranarayana n

    Ananthakrishnan (Mr.)

    Nominee Director-Idbi Bank Ltd.

    Ratan Jindal (Mr.) Promoter-Director, Non-Executive

    Director

    Haigreve Khai tan (Mr.) Non-Executive Director

    Arun Kumar (Mr.) Non-Executive Director

    Sushi l Kumar Maroo (Mr.) Non-Executive Director

    Rahul Mehra (Mr.) Non-Executive Director

    Arun Kumar Purwa r (Mr.) Non-Executive Director

    Ram Vinay Shahi (Mr.) Non-Executive Director

    Hardip Singh Wirk (Mr.) Non-Executive Director

    Nausad Akhter Ansari (Mr.) Wholetime Director

    Board of Directors

    Additional Disclosure

    This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT).

    Disclaimer

    This report is based on data publicly available or from sources considered reliable. CRISIL Ltd. (CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as

    such. The data / report is subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report constitutes investment,

    legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use made of this data / report. CRISIL espe...

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