Source: India Infoline News Service
JSW Steel JSW Steel reported a record high in monthly production with its crude steel production reaching 1.46mn tonnes in January 2018, an increase of 5% yoy. This increase was caused in large part by the increased production of long steel products. This takes the production of crude steel to 13.42mn tonnes for the first 10 months of FY18, an increase of 2.8% yoy. The production of long products stood at 2.85mn tonnes for the same period, an increase of 5.9% yoy.
Infrastructure and construction sectors have received a big boost from schemes like Bharatmala, Sagarmala and Affordable Housing. As long products are used extensively in these sectors, it is likely that demand for long products is likely to keep utilization levels of steel producers high. Thus, the prospects for JSW Steel remain strong over the medium term.
JSW Steel is the largest private sector steel manufacturer in the country with a capacity of 18mn tonnes per annum (mtpa) in FY17. The company aims to expand this capacity to 23mtpa by 2020. The company also owns a plate mill in USA and iron ore mines in Chile. The standalone finished steel production for the company stood at 11.4mt for 9MFY18, an increase of 5% yoy. The management has stated a production target of 15.5mt for FY18.
We expect the company to report revenue CAGR of 7.4% over FY17-20E aided by (a) 8.6% CAGR volume growth in sale of steel products supported by spending on construction and infrastructure and (b) affordable schemes to help in higher real estate spending. EBITDA margins are also likely to expand by ~252bps owing to better utilization levels. The stock is currently trading at 9.8x FY20E EPS.
JSW Steel Ltd is currently trading at Rs 294.35, up by Rs 4.3 or 1.48% from its previous closing of Rs 290.05 on the BSE. The scrip opened at Rs 291 and has touched a high and low of Rs 295.8 and Rs 290 respectively. The BSE group ‘A’ stock of face value Rs 1 has touched a 52 week high of Rs 313.95 on 02-Feb-2018 and a 52 week low of Rs 175.05 on 10-Mar-2017. Last one week high and low of the scrip stood at Rs 313.95 and Rs 275 respectively.