Source: India Infoline News Service
Crude steel production for JSW Steel grew to 4.11mn tonnes for Q3FY18 from 3.86mn tonnes in Q3FY17, an increase of 6.5% yoy. This increase was due to the 18.9% yoy growth in production of long products for the company. The management has stated that the sharp rise in long steel production came from rising demand from construction activity in the country. The production for the company for 9MFY18 currently stands at 11.96mn tonnes up 2% yoy from 9MFY17. Production of long products is up by 4% in the same period and stood at 2.48mn tonnes.
JSW Steel closed yesterday’s trade at Rs283.4, up by Rs0.3 or 0.11% from its previous closing of Rs283.1 on the BSE. The scrip had opened at Rs285.9 and touched a high and low of Rs285.9 and Rs278.7 respectively.
JSW Steel, part of the JSW Group, is one of India’s leading private steel manufacturers with an installed capacity of 18MTA. Revenue mix FY17, OEM (56%), retail (32%), and auto (12%) contributed to revenue. The company has grown at 11% CAGR over FY13-17.
Company’s focus on increased production and higher realizations has helped it sustain a weak demand environment. Volume growth over FY17-19E is expected at 4% CAGR. Government’s measures like minimum import price (MIP) and anti-dumping duties are expected to support indigenous steel producers and improve realizations. Government’s various initiative to push affordable housing, water and gas pipelines, renewable energy and road sector to aid revenue growth. Further, company’s tight control on debt is expected to boost its profitability. Hence, we expect the company to post PAT growth of 20% CAGR over FY17-19E. Financial leverage is reasonable with Debt to Equity at 1.9x; and interest coverage at 4.1x on FY17.