Cons. Debt At Around Rs.35000 cr With Yr. Intt Liability Rs.3500 Cr And Last Five Yrs Avg. Profit Rs.1652 cr.
Technically, JSW has to sustain over 1210-1230 zone for further rally up to 1275-1365 area; otherwise it may face selling pressure and sustain below 1160-1140 may fall again towards 1075-1030 zone.
Trading Idea: JSW Steel
CMP: 1195
Either sell below 1210 or on rise around 1230-1250;
TGT1: 1160*-1110-1075-1030-998-950* (1-3M)
TGT2: 935-870-835-800*-770-740* (6-12M)
TSL> 1280
Note: Consecutive closing (3 days) above 1280 area for any reason, JSW may further rally up to 1365-1400* & 1470 in the near to long term (alternative bullish case scenario from the present trading level).
Some interesting data about JSW:
TTM EPS: (-) 36.59
NET P/L (AVG FOR LAST 5 QTRS): (-) 104.38 cr
Even after the actual implementation of all the budget proposal for infra & housing in India, steel demand is expected to grow around 5.5%, whereas production may grow around 7.5% CAGR.
Present (2014-15) production of steel is 92.16 MT & demand is around 76.99 MT; i.e. domestic supply/demand gap is around 15 MT (excluding imports).
With out China import factor, India may soon have excess capacity in Steel, if there will be no significant economic recovery.
Govt is now planning extra duty on the MIP & landed cost (CIF) differential for suspected over invoicing. But, this type of protection will be counter reproductive and consumers of steel & so called "Make In India" initiative may suffer. MSME & other steel consumers may also want similar stimulus package from the Govt for their own survival.
Recent surge in steel prices in India are driven more by rally in international steel prices rather than MIP. Global steel prices rallied from the recent Dec'15 low of $260/T to almost $360/T in March'16 on the back of seasonal Chinese new year factor and some stimulus talks by China in its CPC.
But its more of speculative in nature and may not sustainable as observed in the one day sudden rally of 20% in iron ore and subsequent volatility. In reality, there is so such corresponding incremental demand in the physical market. So, looking ahead, global steel prices will be in the lower side simply because of demand supply dynamics.
In India, though imports has fallen moderately even after MIP, its still at significant level around 10 MT In Feb'16. At the same time exports from India has fallen too by 31% at Dec'15.
Overall fall in steel imports are being neutralized by incremental increase in domestic supplies amid subdued demands and thus probability of steep increase in prices for MIP (up to 25%) may be remote in the near future. Any significant price for MIP increase will in staggered nature.
JSW has now 18-22 MT capacity and by 2025, they are planning for 40 MT against overall India target of 300 MT. But, going by the present level of steel consumption (demand) in India, which is around 80 MT/Year and the projected incremental demand (around 6.5% CAGR keeping in view implementation of all the budget proposals/infra/housing and "Make In India" initiative), by 2025, India may consume maximum 130-150 MT against projected installed capacity of around 300 MT. Thus there may be 50% excess supply of domestic steel against demand without the import/export factor.
Though, globally steel production came down by around 14 MT (5.5%) in Jan-Feb'16, led by China (7 MT), actual re-balancing and its sustainable effect on price may take much more time, even after gradual production cut. It may be like a "Oil market" type of scenario.
Q3FY16 result of JSW was much below street estimates (all figures are Rs. in crores).
For JSW Steel:
Consolidated TTM Q3FY16 EPS: (-) 36.59
Projected FWD EPS: (-) 25.55-53.05-61.15 (FY:16-18)
Average PE: 10-15 (Against Industry Average of 8; Considering the favourable OPEX, MIP and political connections of the group & huge debt of around Rs.40000 cr at Q3FY16)
As par BG metrics and current market scenario:
Present median valuation of JSW may be around: NA
Projected fair valuations might be around: NA-770-830 (FY:16-18)
Recent surge in steel prices in India are driven more by rally in international steel prices rather than MIP. Global steel prices rallied from the recent Dec'15 low of $260/T to almost $360/T in March'16 on the back of seasonal Chinese new year factor and some stimulus talks by China in its CPC.
But its more of speculative in nature and may not sustainable as observed in the one day sudden rally of 20% in iron ore and subsequent volatility. In reality, there is so such corresponding incremental demand in the physical market. So, looking ahead, global steel prices will be in the lower side simply because of demand supply dynamics.
In India, though imports has fallen moderately even after MIP, its still at significant level around 10 MT In Feb'16. At the same time exports from India has fallen too by 31% at Dec'15.
Overall fall in steel imports are being neutralized by incremental increase in domestic supplies amid subdued demands and thus probability of steep increase in prices for MIP (up to 25%) may be remote in the near future. Any significant price for MIP increase will in staggered nature.
JSW has now 18-22 MT capacity and by 2025, they are planning for 40 MT against overall India target of 300 MT. But, going by the present level of steel consumption (demand) in India, which is around 80 MT/Year and the projected incremental demand (around 6.5% CAGR keeping in view implementation of all the budget proposals/infra/housing and "Make In India" initiative), by 2025, India may consume maximum 130-150 MT against projected installed capacity of around 300 MT. Thus there may be 50% excess supply of domestic steel against demand without the import/export factor.
Though, globally steel production came down by around 14 MT (5.5%) in Jan-Feb'16, led by China (7 MT), actual re-balancing and its sustainable effect on price may take much more time, even after gradual production cut. It may be like a "Oil market" type of scenario.
Q3FY16 result of JSW was much below street estimates (all figures are Rs. in crores).
| RESULT | ACTUAL | CONSENSUS | YOY | QOQ | CONSENSUS DEV | YOY DEV | QOQ DEV |
| NET REVENUE | 8698.27 | 8901.2 | 13222.95 | 10906.9 | -2.28% | -34.22% | -20.25% |
| EBITDA | 891.83 | 1205.4 | 2295.72 | 1729.26 | -26.01% | -61.15% | -48.43% |
| OPM(%) | 10.25% | 13.54% | 17.36% | 15.85% | -24.29% | -40.94% | -35.33% |
| PAT | -923.34 | -351.00 | 328.94 | 116.95 | -163.06% | -380.70% | -889.52% |
| EPS | -38.54 | -14.52 | 13.26 | 4.49 | -165.43% | -390.65% | -958.35% |
For JSW Steel:
Consolidated TTM Q3FY16 EPS: (-) 36.59
Projected FWD EPS: (-) 25.55-53.05-61.15 (FY:16-18)
Average PE: 10-15 (Against Industry Average of 8; Considering the favourable OPEX, MIP and political connections of the group & huge debt of around Rs.40000 cr at Q3FY16)
As par BG metrics and current market scenario:
Present median valuation of JSW may be around: NA
Projected fair valuations might be around: NA-770-830 (FY:16-18)
| SCRIP | EPS(TTM) | BV(Act) | P/E(AVG) | Low | High | Median | 200-DEMA | 10-DEMA |
| JSWSTEEL | -36.59 | 919.59 | 10 | #NUM! | #NUM! | #NUM! | 1017.35 | 1221.41 |
| JSWSTEEL | -25.55 | 970.65 | 10 | #NUM! | #NUM! | #NUM! | 1017.35 | 1221.41 |
| JSWSTEEL | 53.05 | 1025.95 | 10 | 734.65 | 804.96 | 769.80 | 1017.35 | 1221.41 |
| JSWSTEEL | 61.15 | 1080.35 | 10 | 788.74 | 864.23 | 826.48 | 1017.35 | 1221.41 |
Analytical Charts:
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