2QFY2019 Result Update | Steel & Power
November 15, 2018
Jindal Steel & Power
BUY
CMP
`175
Target Price
`320
Investment Period
12 Months
Performance Update
INR Cr.
Q2FY19
Q2FY18
% chg. (yoy) Q1FY19
% chg. (qoq)
Total Income
9983
6123
63
9602
4
Operating profit
2207
1373
60.72
2277
-3
Market Cap (` cr)
16,939
OPM (%)
22.1
22.3
-21.6(bps)
23.7
-160(bps)
Net Debt (` cr)
42,605
PAT
279
-499
NA
111
152
Beta
2.6
Source: Company, Angel Research
52 Week High / Low
294/157
For Q2FY2019, JSPL has delivered in-line performance on revenue front and
Avg. Daily Volume
872,696
Face Value (`)
1
registered a growth of 63% to Rs9,983cr on yoy basis and 4% growth on qoq basis,
BSE Sensex
35,142
However, despite this growth, JSPL was not able to show improvement on bottom-
Nifty
10,577
line front due to lower realization in Product mix and higher Iron ore, Coal and
Reuters Code
JNSP.BO
import cost, which led to de-growth in EBIDTA/tonne during the quarter from
Bloomberg Code
JNSP IN
Rs13,800/tonne in Q1FY2019 to Rs11,500/tonne in Q2FY2019. Management
expects raw material prices to soften in coming quarters. On volume front, sales
Shareholding Pattern (%)
has improved to 1.75 MT, up by 38% on you basis and 9% on qoq basis. Angul
Promoters
58.7
ramp up is increasing and it is improved by 10% from previous quarter.
MF / Banks / Indian Fls
6.9
FII / NRIs / OCBs
19.2
JPL: Power segment has reported de-growth by 6% on EBIDTA front on qoq basis
Indian Public / Others
15.2
and 12% on yoy basis to `302cr as against `314cr and `345cr in Q2FY2018
Abs.(%)
3m
1yr
3yr
respectively. Margin has been down by 614bps on yoy basis owing to increase in
Sensex
(6.6)
6.7
37.2
raw material prices as compared to last year. However, it has improved by 71bps
JSPL
(12.5)
2.8
121.0
on qoq basis to 33.2%. Due to seasonality issue, there was shortage of coal during
the quarter, we expect that post monsoon the coal situation should improve and
upcoming election followed by summer will keep power demand at higher levels.
Outlook & Valuation: We have positive view on steel and power sectors on long
3years performance chart
term basis and expect JSPL to perform well in coming years owing to ramp up of
Angul plant and realization in steel segment. We also expect power segment to
350
perform well on account of improving power demand situation and various effort
300
by GoI for availability of fuel to power generator. We maintain our Buy
250
recommendation with target Price of Rs320 with a potential upside of 82%.
200
150
100
Key Financials
50
Y/E March (` cr)
FY17
FY18
FY19E
FY20E
0
Net Sales
20,409
27,383
38,967
45,973
% chg
14
34
42
18
EBIDTA
4,337
5,882
8,763
11,095
Source: Company, Angel Research
% chg
35
36
49
27
EBITDA (%)
21%
21%
22%
24%
EPS (Rs)
(26)
(17)
9
26
P/E (x)
-
-
21
7
P/BV (x)
0.6
0.6
0.6
0.5
Kripashankar Maurya
RoE (%)
-
-
2.7
7.5
RoCE (%)
0.6
2.9
6.6
10.1
022-39357800 Ext: 6004
EV/EBITDA
13.1
9.6
6.3
4.5
Source: Company, Angel Research
Valuation done based on 14th November 2018 closing price
Please refer to important disclosures at the end of this report
1
JSPL | 2QFY2019 Result Update
Exhibit 1: 2QFY2019 Performance
In Cr
Q2FY19
Q2FY18
Q1FY19
YOY %
QOQ%
Net Sales
9983
6151
9602
62.3%
5%
Total Income
9982
6123
9665
63%
5%
Total Expenditure
7775
4750
7389
64%
5%
Raw Material Consumed
3999
2235
3739
79%
3%
Stock Adjustment
78
-47
-109
-265%
-20%
Purchase of Finished Goods
280
61
141
361%
NA
COGS
4357
2248
3771
94%
3%
Employee Expenses
269
245
245
10%
-1%
Other Expenses
3222
2373
3435
36%
19%
Captive sales
-74
-116
-63
Raw Material Consumed
40%
36%
39%
Stock Adjustment
1%
-1%
-1%
Purchase of Finished Goods
3%
1%
1%
COGS
44%
37%
39%
Gross Margin %
44%
37%
39%
Employee Expenses
3%
4%
3%
Other Expenses
32%
39%
36%
EBITDA
2207
1373
2277
51%
5%
Other Income
0.91
1.4
0.0
-34%
-5%
Interest
1086
927
973
17%
11%
PBDT
1122
448
1304
151%
5%
Depreciation
1031
998
1039
3%
0%
PBT
91
-550
265
-117%
7%
Exceptional Item (gain/loss)
-255
149
0
-271%
Tax
67.21
-200
154
-134%
-18%
PAT
279
-499
111
-156%
24%
Ratios
BPS
BPS
EBITDA margin (%)
22.11
22.33
23.71
-22
-160
PAT margin %
0.03
-0.08
1.15
11
-113
Tax rate %
73.80
36.41
58.13
3739
1567
Source: Company, Angel Research
Company background
JSPL is part OP Jindal Group with presence in steel, power and mining sectors.
JSPL has capacity of 10.6 MTPA crude steel and 3,400MW of power generation
capacity through its subsidiary Jindal Power Limited (JPL).
JSPL operates the largest coal based sponge iron plant in the world and has an
installed capacity of 3 MTPA (million tonnes per annum) of steel at Raigarh in
Chhattisgarh. Moreover, it has set up a 0.6 MTPA wire rod mill and a 1 MTPA
capacity bar mill at Patratu, Jharkhand, a medium and light structural mill at
Raigarh, Chhattisgarh and a 2.5 MTPA steel melting shop and a plate mill to
produce up to 5 meter-wide plates at Angul, Odisha. In Oman (Middle East), the
company has a 2 MTPA integrated steel plant with a 1.5 MTPA gas-based Hot
Briquetted Iron (HBI) plant.
November 15, 2018
2
JSPL | 2QFY2019 Result Update
JSPL has installed power capacity of
3,400MW through its wholly owned
subsidiary Jindal Power Limited (JPL). In FY18, JPL had Power Purchase Agreement
(PPA) of 1,350MW and it operates at 35-37% utilization.
Valuation Assumption
We value the stock on Asset based approach, valuing each segment’s assets at
discount to its peer companies, while applying multiple to respective asset. We
arrive at the SOTP based target price of ` 320.
Exhibit 2: Asset Based SOTP Valuation
Segments
Capacity
Multiple (X)
Total INR Cr.
Power- (EV/MW)*
3,400
4
13,600
Steel- (EV/Tonne)#
10.6
5,400
57,240
Consol Enterprise Value (A)
70,840
Add
CWIP (B)
3,783
Cash(C)
946
Subtotal (D )= (A)+(B)+(C)
75,569
Less
Debt FY19 (Sept)
42,605
Equity Value ( F)= (D)-(E)
32,964
No of share (G)^
102
Value per share INR (F)/(G)
324
CMP
175
Upside
85%
Source: Company, Angel Research
Note:
*Disinvestment announced in May 2016 by JSW Energy to acquire 1,000MW
(4X250) Tamnar Thermal Power Plant from JSPL.
Valuing Power segment by applying multiple of `4cr/MW at 21% discount to JSW
Energy’s of EV `4.9cr/MW.
# Valuing the steel segment by applying multiple of `5,400cr/MTPA at 26%
discount to JSW Steel’s EV/Tonne of `6,849cr/MTPA.
^ Factoring issuance of warrant shares.
Exhibit 3: Peer Asset Valuation
Particular
JSW steel Tata Steel JSW Energy Tata power
NTPC
EV/Tonne
6,849
6,362
EV/MW
4.9
6.1
4.7
Crude steel Capacity
18
28
(MTPA)
Power Generation Capacity (MW)
4,451
10,757
52,946
Source: Company, Angel Research
November 15, 2018
3
JSPL | 2QFY2019 Result Update
Consolidated Financial Statement
Y/E March (` cr)
FY17
FY18
FY19E
FY20E
Total operating income
21,051
27,383
38,967
45,973
% chg
15
30
42
18
Total Expenditure
16,714
21,502
30,203
34,878
Raw Material
6,535
9,378
12,896
15,215
Personnel
914
956
1,361
1,605
Purchase of finished goods
265
324
385
455
Others Expenses
8,999
10,843
15,561
17,603
EBIDTA
4,337
5,882
8,763
11,095
% chg
35
36
49
27
(% of Net Sales)
20.6
21.5
22.5
24.1
Depreciation& Amortisation
3,949
3,883
4,114
4,234
EBIT
388
1,999
4,650
6,862
% chg
(145)
415
133
48
(% of Net Sales)
2
7
12
15
Interest & other Charges
3,441
3,866
3,557
3,557
Other Income
10
3
3
3
Extraordinary Items
(372)
(577)
-
-
Recurring PBT
-2,671
-1,287
1,096
3,308
% chg
(28)
(52)
(185)
202
Tax
-503
-240
252
761
PAT (reported)
-2,168
-1,047
844
2,547
% chg
(24)
(52)
(181)
202
(% of Net Sales)
-10.3
-3.8
2.2
5.5
Basic & Fully Diluted EPS (Rs)
-26
-17
9
26
% chg
(18)
(36)
(152)
202
Source: Company, Angel Research
November 15, 2018
4
JSPL | 2QFY2019 Result Update
Consolidated Balance Sheet
Y/E March (` cr)
FY17
FY18
FY19E
FY20E
SOURCES OF FUNDS
Equity Share Capital
92
97
97
97
Reserves& Surplus
29,959
30,283
31,127
33,674
Shareholders Funds
30,051
30,380
31,224
33,771
Equity Share warrant
5
5
5
Minority Interest
647
440
338
235
Total Loans
39,958
39,198
38,824
34,362
Other Liabilities
6,430
6,074
8,662
8,865
Total Liabilities
77086
76097
79053
77238
APPLICATION OF FUNDS
Net Block
66,934
69,550
67,732
65,997
Capital Work-in-Progress
8,714
3,877
1,947
1,850
Investments
368
146
146
146
Long Term Loans & Advances
-
-
Current Assets
13,022
14,313
20,517
23,892
Inventories
3,599
4,960
6,864
7,475
Sundry Debtors
1,717
1,826
2,600
3,068
Cash & Cash Equivalent
477
468
992
2,224
Loans & Advances
6,841
6,589
9,633
10,676
Investments & Others
387
471
429
450
Current liabilities
13,489
13,133
18,759
21,422
Net Current Assets
-467
1,180
1,758
2,469
Other Non Current Asset
1,537
1,343
7,470
6,775
Total Assets
77086
76097
79053
77238
Source: Company, Angel Research
November 15, 2018
5
JSPL | 2QFY2019 Result Update
Cash flow
Y/E March (` cr)
FY17
FY18
FY19E
FY20E
Profit before tax
(2,671)
(1,287)
1,096
3,308
Depreciation
3,949
3,883
4,114
4,234
Change in Working Capital
Interest / Dividend (Net)
3,441
3,866
3,557
3,557
Direct taxes paid
(503)
(240)
252
761
Others
2,582
(516)
(1,163)
14
Cash Flow from Operations
6,799
5,706
7,855
11,873
(Inc.)/ Dec. in Fixed Assets
(2,354)
(2,000)
(2,499)
(2,498)
(Inc.)/ Dec. in Investments
356
175
(46)
(45)
Cash Flow from Investing
(1,998)
(1,825)
(2,545)
(2,543)
Issue of Equity
0
1,200
-
-
Inc./(Dec.) in loans
-2875.18
-760.44
-374.00
-4462.00
Others
(2,181)
(4,305)
(4,207)
(3,637)
Cash Flow from Financing
(5,057)
(3,866)
(4,581)
(8,099)
Inc./(Dec.) in Cash
(256)
15
730
1,232
Opening Cash balances
503
247
262
992
Closing Cash balances
247
263
992
2,224
Source: Company, Angel Research
Key Ratios
Y/E March
FY2017
FY2018
FY2019E
FY2020E
P/E (on FDEPS)
-
-
20.9
6.9
P/CEPS
9.9
6.2
3.6
2.6
P/BV
0.6
0.6
0.6
0.5
EV/Sales
2.8
2.1
1.4
1.1
EV/EBITDA
13.1
9.6
6.3
4.5
EV / Total Assets
0.7
0.7
0.7
0.6
Per Share Data (Rs)
EPS (Basic)
-26.2
-16.8
8.7
26.3
EPS (fully diluted)
-25.0
-16.0
8.3
25.1
Cash EPS
18.4
29.3
51.2
70.1
DPS
0.0
0.0
0.0
0.0
Book Value
310
314
323
349
Returns (%)
ROCE
0.6
2.9
6.6
10.1
Angel ROIC (Pre-tax)
0.6
2.8
6.1
9.4
ROE
-8.5
-5.3
2.7
7.5
Turnover ratios (x)
Inventory / Sales (days)
64
67
65
60
Receivables (days)
31
25
25
25
Payables (days)
52
56
56
56
Working capital cycle (ex-cash) (days)
43
35
33
28
Source: Company, Angel Research
November 15, 2018
6
JSPL | 2QFY2019 Result Update
Research Team Tel: 022 - 39357800
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Company Name
1. Financial interest of research analyst or Angel or his Associate or his relative
No
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No
relatives
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November 15, 2018
7
