-
February 2, 2017
ICICI Securities Ltd | Retail Equity Research
Result Update
Healthy realisations boost profitability…. JSW Steel reported
healthy Q3FY17 numbers amid demonetisation
and a sharp increase in raw material prices. The
better-than-expected performance was primarily driven by healthy
realisations QoQ
Sales volume for the quarter came in at 3.64 million tonne (MT),
a tad higher than our estimate of 3.6 MT. Gross consolidated
topline for the quarter was at | 15312.34 crore. After adjusting
for excise duty, net operating income (consolidated) was at |
14012.6 crore (up 61.9% YoY, 5.9% QoQ) higher than our estimate of
| 13251.6 crore. The healthy increase in revenues during the
quarter was also on account of the miscellaneous income of ~| 825
crore (Q2FY17: ~| 400 crore) pertaining mostly to the sale of coal
and gases to JSW Energy
Apart from healthy realisations, increased topline, inventory
gains of ~| 215 crore further supported the EBITDA/tonne that was
at | 7717/tonne, up 9.0% QoQ (Q1FY17: | 9276/tonne, Q2FY17: |
7077/tonne, Q3FY16: | 3443/tonne) and higher than our estimate of |
5000/tonne
Subsequently, consolidated EBITDA was at | 2866.9 crore (down
3.1% QoQ, up 193.4% YoY). Ensuing consolidated PAT came in at |
730.1 crore
Maintains guidance of15 MT steel sales for FY17E...
On the back of completion of capacity enhancements undertaken in
H2FY16, JSW Steel posted strong volume growth of ~22% YoY in
9MFY17. Sales volume in the aforesaid period was at 10.8 MT against
8.8 MT in 9MFY16. For FY17E, JSW Steel has guided crude steel
production, saleable steel sales guidance of 15.75 MT, 15 MT
respectively, implying strong sales volume growth of ~24%. We have
modelled sales volume on the same lines with 15 MT for FY17E, 16 MT
for FY18E and 17 MT for FY19E. Steel sales volume for FY16 was at
12.1 MT.
Access to captive iron ore mines to ensures partial
integration…
JSW Steel has bagged five iron ore mines in the category C mines
auctioned by the Karnataka government. The development augurs well
over a longer term horizon as it would ensure partial raw material
security. The mineable content from these mines is estimated to be
around ~93.0 MT. The annual capacity of these mines together is
~4.7 MT. The mines once operational would cater to ~15-20% of JSW
Steel’s iron ore requirement captively. Currently the company is in
process of acquiring approvals for the mines. The management
envisages commercialising two mines with a capacity of ~0.7 MT by
the April 2017. The remaining three mines (~3.9 MT) will be made
operational by the end of December 2017.
Healthy performance marked by healthy realisations; maintain
HOLD…
JSW Steel reported a healthy performance for Q3FY17 on the back
of a healthy increase in realisations QoQ. On account of the
healthy increase in steel realisations, we maintain the
EBITDA/tonne of | 8000/tonne for FY17E while we revise upward the
same for FY18E to | 8250/tonne (from earlier 8000/tonne). We
further introduce FY19E EBITDA/tonne at | 8500/tonne. On the back
of a healthy traction in volumes, we maintain our sales volume
assumption of 15 MT for FY17E, 16 MT for FY18E and introduce sales
volume of 17 MT for FY19E. We value the stock at 6.0x FY19E
EV/EBITDA and arrive at a target price of | 200. We have a HOLD
recommendation on the stock.
Rating matrix
Rating : HoldTarget : | 200Target Period : 12 monthsPotential
Upside : 4%
What’s Changed?
Target Changed from | 175 to | 200
EPS FY17E Changed from | 14.6 to | 15.1 EPS FY18E Changed from |
16.0 to | 17.2 EPS FY19E Introduced at | 19.5 Rating Unchanged
Quarterly Performance (Consolidated)
Q3FY17 Q3FY16 YoY (%) Q2FY17 QoQ (%)Adj. Rev. 14,012.6 8,653.7
61.9 13,227.8 5.9 EBITDA 2,866.9 977.1 193.4 2,958.5 (3.1) EBITDA
(%) 20.5 11.3 917 bps 22.4 -191 bpsPAT 730.1 (709.1) LP 726.5
0.5
Key Financials
(| Crore) FY16 FY17E FY18E FY19ENet Revenues 41878.9 57526.2
67385.8 73840.0EBITDA 6073.0 12728.1 13856.7 15096.8Adj Net Profit
1383.5 3654.2 4169.3 4711.2Adj EPS (|) 5.7 15.1 17.2 19.5
Valuation summary
FY16 FY17E FY18E FY19E
PE (x) NA 12.8 11.2 9.9
Target PE (x) NA 13.2 11.6 10.3
EV/EBITDA (x) 14.0 7.0 6.6 5.9
P/BV (x) 2.2 2.0 1.7 1.5Adj RoNW (%) 6.4 15.8 15.5 15.1Adj RoCE
(%) 4.8 13.5 14.0 15.1
*The ratios are calculated post the stock split of 10:1
Stock data Particular AmountMarket Capitalisation | 46648 crore
Debt-Cons. (FY16) | 39195 croreCash Cons. (FY16) | 734 croreEV |
85109 crore52 week H/L | 200 / 95Equity capital | 241.72 croreFace
value | 1
Price performance (%) Return % 1M 3M 6M 12MJSW Steel 21.8 19.5
18.3 87.5SAIL 28.9 22.7 35.4 48.5Tata Steel 18.4 14.4 30.4 85.4
Research Analyst
Dewang Sanghavi [email protected]
Akshay Kadam [email protected]
JSW Steel (JSWSTE) | 193
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ICICI Securities Ltd | Retail Equity Research Page 2
Variance analysis Q3FY17 Q3FY17E Q3FY16 YoY (%) Q2FY17 QoQ (%)
Comments
Adjusted Revenue(net of excise)
14,012.6 13,251.6 8,653.7 61.9 13,227.8 5.9The topline came in
higher than our estimates on account of healhtyrealisations QoQ and
miscellaneous income to the tune of ~| 825 crorepertaining to sale
of coal and gases to JSW Energy
Other Income 33.3 30.0 27.2 22.4 29.6 12.5Employee Expense 425.2
485.7 356.7 19.2 432.2 -1.6 Employee expense came in lower than our
estimateRaw Material Expense 7,366.1 7,666.0 4,875.6 51.1 6,583.0
11.9 Raw material expense came in lower than our estimatePower
& Fuel Expense 1,258.6 1,261.4 689.8 82.5 1,211.9 3.9Other
operating Expenses 2,095.8 2,038.4 1,754.7 19.4 2,042.2 2.6
EBITDA 2,866.9 1,800.1 977.1 193.4 2,958.5 -3.1EBITDA came in
higher than our estimate owing to healhty realisation and inventory
gains of ~| 215 crore
EBITDA Margin (%) 20.5 13.6 11.3 917 bps 22.4 -191 bps EBITDA
margin came in higher than our estimateDepreciation 914.6 820.0
830.2 10.2 891.5 2.6Interest 920.1 930.0 891.0 3.3 964.6
-4.6Exceptional Item - 0.0 2,122.1 -100.0 0.0 NAPBT 1,065.5 80.1
-2,839.1 -137.5 1,132.0 -5.9Tax Outgo 351.1 26.4 -2,024.5 -117.3
473.3 -25.8PAT 714.5 53.7 -814.6 -187.7 658.7 8.5Minority Interest,
Share of Associate &Extra Ordinary Item
(15.6) -5.4 -105.5 -85.2 -67.8 -77.0
PAT for the Group 730.1 59.0 -709.1 -203.0 726.5 0.5 PAT came in
higher than our estimateKey MetricsSteel Sales (MT) 3.6 3.6 2.6
40.0 3.8 -4.2 Sales volume came in tad higher than our
estimateStandalone EBITDA/tonne (|/ton 7717 5000 3443 124.1 7077
9.0
Source: Company, ICICIdirect.com Research Change in
estimates
FY19E(| Crore) Old New % Change Old New % Change Introduced
CommentsRevenue 57,503 57,526 0.0 66,889 67,386 0.7 73,840
Maintained estimates for both years, introduced for FY19EEBITDA
12,512 12,728 1.7 13,418 13,857 3.3 15,097 Upward revised for FY17E
& FY18E, introduced FY19E
EBITDA Margin (%) 21.8 22.1 37 bps 20.1 20.6 50 bps 20.4
EBITDA (|/tonne) 8000 8000 0.0 8000 8250 3.1 8500 Upward revised
for FY18E, introduced FY19E
PAT 3525 3654 3.7 3873 4169 4711 Upward revised for FY17E both
FY18E, introduced FY19E
EPS (|) 14.6 15.1 3.7 16.0 17.2 7.7 19.5
FY17E FY18E
Source: Company, ICICIdirect.com Research, *-Standalone entity
Assumptions
E
FY16 FY17E FY18E FY19E FY17E FY18ETotal Steel Sales (MT) 12.1
15.0 16.0 17.0 15.0 16.0 Introduced FY19EEBITDA/tonne (|/tonne) *
4,725 8,000 8,250 8,500 8,000 8,000 Upward revised estimate for
FY18E, introduced FY19E
CommentsEarlierCurrent
Source: Company, ICICIdirect.com Research, *-Standalone
entity
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ICICI Securities Ltd | Retail Equity Research Page 3
Company Analysis JSW Steel augmented its steel producing
capacity from 14.3 MT to 18.0 MT in FY16. The capacity of its
Vijayanagar plant in Karnataka was increased to 12.0 MT from 10.0
MT. The plant capacity at Dolvi, Maharashtra was enhanced to 5.0 MT
from earlier 3.3 MT (erstwhile Ispat Industries) while the plant
capacity at Salem, Tamil Nadu was at 1 MT.
Maintains guidance of15 MT steel sales for FY17E...
On the back of completion of capacity enhancements undertaken in
H2FY16, JSW Steel registered strong volume growth of ~22% YoY in
9MFY17. Sales volume during the aforesaid period came in at 10.8 MT
against 8.8 MT in 9MFY17. For FY17E, JSW Steel has guided crude
steel production and saleable steel sales guidance of 15.75 MT and
15 MT, respectively, implying strong sales volume growth of ~24%.
We model the sales volume on same lines with 15 MT for FY17E, 16 MT
for FY18E and 17 MT for FY19E. Steel sales volume for FY16 was at
12.1 MT.
Exhibit 1: Sales volume trend…
12.1
15.016.0
17.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
FY16 FY17E FY18E FY19E
milli
on to
nne
Source: Company, ICICIdirect.com Research
Exhibit 2: ..EBITDA/tonne to firm up, going forward
4725
8000 82508500
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
FY16 FY17E FY18E FY19E
|/to
nne
Source: Company, ICICIdirect.com Research
Access to captive iron ore mines to ensures partial
integration…
In the recently concluded auctions of category C iron ore mines
in Karnataka, JSW Steel has bagged five mines. The estimated
resources in these five mines as per tender documents is ~111
million tonnes (MT). The mineable content from these mines is
estimated to be around ~93.0 MT. The annual capacity of these mines
together is at ~4.7 MT. The management will take all requisite
steps to obtain letter of intent, all statutory clearances, execute
Mine Development and Production Agreement (MOPA) and start mining
operations. The management envisages commercialising two mines with
a capacity of ~0.7 MT by the end of FY17. The remaining three mines
(~3.9 MT) will be made operational by the end of December 2017.
Currently the company is in process of acquiring approvals, the
mines once operational would cater to ~15-20% of JSW Steel’s iron
ore requirement captively. Exhibit 3: Mines where JSW has emerged
as preferred bidder...
Sr. No Name of Mine Est. Resource (MT)
1 Ram Rao Paol 31.5
2 Tungabhadra Minerals Pvt Ltd 33.9
3 Tungabhadra Minerals Pvt Ltd 6.9
4 Hothur Traders 10.0
5 V S Lad & Sons 28.6 Source: Source: Department of Mines
and Geology (Government of Karnataka), ICICIdirect.com Research
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ICICI Securities Ltd | Retail Equity Research Page 4
Elevated debt level remains area of concern
Post the merger with Ispat Industries, the debt level of JSW
Steel has increased significantly. On a consolidated basis, at the
end of Q3FY17, the net gearing was at 2.11x (2.15x at the end of
Q2FY17) while net debt to EBITDA was at 4.02x (4.82x at the end of
Q2FY17). On a standalone basis, at the end of Q2FY17, net gearing
was at 1.72x (1.75x at the end of Q2FY17) while net debt to EBITDA
was at 3.72x (4.41x at the end of Q2FY17).
Exhibit 3: Gross debt & net debt trend
3488
5
3919
5
4514
5
4764
5
4514
5
3297
1
3846
1
4451
5
4223
6
4259
8
05000
1000015000200002500030000350004000045000
FY15 FY16 FY17E FY18E FY19E
| cr
ore
Gross Debt Net Debt
Source: Company, ICICIdirect.com Research
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ICICI Securities Ltd | Retail Equity Research Page 5
Key takeaway from conference call
• Saleable steel volumes registered a decline on a QoQ basis of
5%. Liquidity issues post demonetisation resulted in a decline of
~12% in the retail segment. The decline in retail sales was covered
by increased sales to OEM. Overall value added & special
products (VASP) sales grew 38% YoY – CRCA ~43%, special longs ~23%,
coated ~23%, overall VASP improved to 37% of total sales
• The net sales realisation during the quarter increased by ~|
3200-
3400/tonne compared to the previous quarter owing to the price
hikes taken during the quarter
• Apart from the increase in realisations, the revenue increase
also
accounts for | 825 crore miscellaneous income increased from |
400 crore in the previous quarter. The increase was mostly on
account of sale of coal and gases to JSW Energy as the CPP in
Vijayanagar was closed for maintenance
• Along with higher realisation, inventory gains of ~| 215 crore
resulted
in higher-than-expected reported EBITDA • The blended coking
coal cost during the quarter was at
~US$172/tonne. For Q4FY17, the same is expected to be
~US$220-225/tonne. Hard coking coal consists of 55-60% of the mix.
The company continues to improve the coking coal mix used in
production to control costs
• The company in the month of January has effectively increased
the
flat product prices by ~US$30-35/tonne
• The management maintained the FY17 steel sales guidance of 15
MT • The management maintained the capex guidance of | 4300 crore
for
FY17, of which it expended ~| 3300 crore during 9MFY17. The
balance ~| 1000 crore is likely to be spent in Q4FY17
• The management indicated that two out of the five mines won in
the
auctions will be operational by the end of April 2017. The
company is in the process of obtaining approvals for same. The
other three mines would be operational by the end of December 2017
for which the company has to apply for approvals afresh
• On inorganic growth, the management indicated that it
continues to
evaluate opportunities in India and outside
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ICICI Securities Ltd | Retail Equity Research Page 6
• Performance of subsidiaries JSW Steel Coated Products During
the quarter, JSW Steel Coated Products registered production
(galvanised/galvalume products) volume of 0.43 MT and sales volume
of 0.44 MT. The total income from operations and operating EBITDA
for the quarter was at | 2437 crore and | 142 crore, respectively.
Net profit after tax was at | 55 crore. US plate and pipe mill The
US-based pipe and plate mill facility produced 42291 net tonnes of
plates and 11585 net tonnes of pipes, reporting capacity
utilisation of 18% and 8%, respectively, in Q3FY17. Sales volumes
for the quarter were at 31009 net tonnes of plates and 11544 net
tonnes of pipes. It reported an EBITDA loss of US$4.36 million for
the quarter. JSW Industrial Gases Pvt Ltd In August 2016, the
company acquired the entire shareholding of 74% of Praxair India
Pvt Ltd in JSW Praxair Oxygen Pvt Ltd for a cash consideration of |
240 crore. As a result, JIGPL has become a wholly owned subsidiary
of the company. The name of this entity has been changed to JSW
Industrial Gases Pvt Ltd with effect from September 30, 2016.
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ICICI Securities Ltd | Retail Equity Research Page 7
Valuation JSW Steel reported a healthy performance in Q3FY17 on
the back of a healthy increase in realisations QoQ. On account of a
healthy increase in steel realisations, we maintain the
EBITDA/tonne of | 8000/tonne for FY17E while we revise upward the
same for FY18E to | 8250/tonne (from earlier | 8000/tonne). We
further introduce FY19E EBITDA/tonne at | 8500/tonne. On the back
of a healthy traction in volumes, we maintain our sales volume
assumption of 15 MT for FY17E, 16 MT for FY18E and introduce sales
volume of 17 MT for FY19E. We value the stock at 6.0x FY19E
EV/EBITDA and arrive at a target price of | 200. We have a HOLD
recommendation on the stock.
Exhibit 4: Target price calculation Particular Unit Value
EBITDA | crore 15097
EV/EBITDA Multiple x 6.0
Enterprise Value (EV) | crore 90581
Gross Debt | crore 45145
Cash & Cash Eq | crore 2909
Net Debt | crore 42236
Implied Market Cap | crore 48345
No of Shares crore 241.7
Target Price | 200
Source: Company, ICICIdirect.com Research
Exhibit 5: Valuation Matrix
Sales (| Crore)
Growth(% YoY)
EPS (|)Growth(% YoY)
PE (x)EV/EBIDTA
(x)P/ BV
(x)RoNW
(%)RoCE (%)
FY15 52971.5 3.4 76.3 -14.8 2.5 8.5 0.2 8.0 10.3FY16 41878.9
-20.9 5.7 PL NM 14.0 2.2 6.4 4.8FY17E 57526.2 37.4 15.1 164.1 12.8
7.0 2.0 15.8 13.5FY18E 67385.8 17.1 17.2 14.1 11.2 6.6 1.7 15.5
14.0FY19E 73840.0 9.6 19.5 13.0 9.9 5.9 1.5 15.1 15.1
Source: Company, ICICIdirect.com Research
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ICICI Securities Ltd | Retail Equity Research Page 8
Recommendation History vs. Consensus
10
40
70
100
130
160
190
220
250
Feb-17Nov-16Sep-16Jun-16Apr-16Jan-16Nov-15Aug-15Jun-15Apr-15Jan-15
(|)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
(%)
Price Idirect target Consensus Target Mean % Consensus with
BUY
Source: Bloomberg, Company, ICICIdirect.com Research Key
events
Date Event
Feb-16 ICRA downgrades the long term credit rating of the
company to ICRA AA- from ICRA AA and reaffirmed the short term
rating at ICRA A1+Mar-16 CARE Ratings downgrades the long term
credit rating of the company to CARE AA- from CARE AA, while
reaffirming its short term rating at CARE A1+Apr-16 Fitch Ratings
downgrades the credit rating of JSW Steel from BB+ to BBApr-16
Blast furnace at Dolvi recommissioned after being shut down for
relining and modification in November 2015
Aug-16As per media sources, JSW Steel expresses interest in
setting up a 10 MT steel plant in Odisha with an outlay of | 50000
crore. In the first phase, it will set up 4 MT steel plant later
ramping up the same to 10 MT. The plan also includes setting up a
slurry pipeline of 280 km with an outlay |1200-1500 crore, a 500 MW
solar plant, a thermal power plant and a coal-mining processing
facility
Sep-16As per media sources, domestic steel players raise steel
product prices by |2500/tonne. Consequently, hot rolled steel
prices were at | 39,000/tonne while cold rolled steel prices were
at | 42000/tonne with effect from September 1
Oct-16 The board approves the fund raising plans up to | 2000
crore through issuance of non convertible debentures (NCDs).
Nov-16 JSW Steel indicates that the US Supreme Court has turned
down a petition filed by JSW Steel's US based subsidiary in an
anti-trust case
Dec-16As per media source, JSW Steel was planning to restart
coking coal mining operations in US by March 2017 following the
sharp increase in prices. The company owns nine coking coal mines
with a cumulative resources of 123 million tonne (MT)
Dec-16The shareholders of JSW Steel have approved the
subdivision of equity share of the company from face value of | 10
each to | 1 each. The company has fixed January 5, 2017 as the
record date for the same
Source: Company, ICICIdirect.com Research Top 10 Shareholders
Shareholding Pattern Rank Name Latest Filing Date % O/S Position
(m) Change (m)1 Jindal Organisation 30-Sep-16 21.1 510.3 0.02 JFE
Steel Corporation 30-Sep-16 - 362.6 0.03 Vividh Consultancy &
Advisory Services Pvt. Ltd. 17-Nov-16 57.8 139.8 0.94 Sahyog
Tradecorp Pvt. Ltd. 30-Sep-16 45.4 109.7 0.05 M. M. Warburg Bank
(Schweiz) AG 30-Sep-16 45.0 108.7 0.06 Danta Enterprises Pvt. Ltd.
30-Sep-16 25.0 60.4 0.07 Virtuous Tradecorp Pvt. Ltd. 30-Sep-16
25.0 60.4 0.08 Gagandeep Credit Capital Pvt. Ltd. 30-Sep-16 19.0
46.0 0.09 Dimensional Fund Advisors, L.P. 31-Oct-16 17.2 41.5
-1.310 The Vanguard Group, Inc. 31-Dec-16 15.0 36.2 0.2
Source: Reuters, ICICIdirect.com Research
in (%) Dec-15 Mar-16 Jun-16 Sep-16 Dec-16Promoters 41.5 41.5
41.5 41.5 41.6FII 15.0 15.0 20.1 20.6 20.3DII 21.5 22.2 17.0 16.4
16.7Others 20.6 21.3 21.4 21.5 21.4
Recent Activity
Investor Name Value (M) Shares(M) Investor Name Value (M)
Shares(M)Vividh Consultancy & Advisory Services Pvt. Ltd. 2.3
0.9 Jindal (Sajjan) -55.8 -23.3Acadian Asset Management LLC 1.1 0.4
Reynold Traders Pvt. Ltd. -43.4 -18.1JM Financial Asset Management
Pvt. Ltd. 0.9 0.4 IDFC Asset Management Company Private Limited
-8.0 -3.2The Vanguard Group, Inc. 0.5 0.2 Jindal (Sangita) -6.9
-2.9DSP BlackRock Investment Managers Pvt. Ltd. 0.3 0.1 Dimensional
Fund Advisors, L.P. -3.3 -1.3
Buys Sells
Source: Reuters, ICICIdirect.com Research
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ICICI Securities Ltd | Retail Equity Research Page 9
Financial summary (Cons.)
Profit and loss statement (| crore)(Year-end March) FY16 FY17E
FY18E FY19ETotal operating Income 41,878.9 57,526.2 67,385.8
73,840.0Growth (%) -20.9 37.4 17.1 9.6Raw Material Expenses
22,750.6 29,395.7 37,318.5 40,886.9Employee Expenses 1,568.0
2,028.7 2,405.8 2,941.6Power and Fuel Costs 3,665.9 4,941.6 5,038.9
5,695.9Mfg and Other expenses 7,821.3 8,432.1 8,765.9 9,218.7Total
Operating Expenditure 35,805.9 44,798.0 53,529.1 58,743.2EBITDA
6,073.0 12,728.1 13,856.7 15,096.8Growth (%) -35.4 109.6 8.9
8.9Depreciation 3,187.9 3,552.3 3,714.3 3,962.9Interest 3,302.7
3,822.1 4,124.9 4,407.5Other Income 168.2 136.3 200.0 300.0PBT
-249.4 5,490.0 6,217.6 7,026.4Exceptional Item -2,125.4 0.0 0.0
0.0Total Tax -1,524.1 1,854.9 2,051.8 2,318.7Reported PAT Before MI
-850.8 3,635.1 4,165.8 4,707.7Profit/(loss) - JV/MI/Associate 108.8
19.1 3.5 3.5Reported PAT After MI -741.9 3,654.2 4,169.3
4,711.2Growth (%) PL NA 14.1 13.0Adj PAT after MI 1,383.5 3,654.2
4,169.3 4,711.2Adj 'EPS (|) 5.7 15.1 17.2 19.5
Source: Company, ICICIdirect.com Research
Cash flow statement (| crore)(Year-end March) FY16 FY17E FY18E
FY19EProfit after Tax -741.9 3,654.2 4,169.3 4,711.2Add:
Depreciation 3,187.9 3,552.3 3,714.3 3,962.9(Inc)/dec in Current
Asset 2,791.2 -13,649.2 -7,683.0 -3,986.9Inc/(dec) in
CL&Provisions -4,805.7 6,253.8 998.9 1,094.8Others -1,744.1
2,571.5 0.0 0.0CF from operating activities -1,312.7 2,382.6
1,199.4 5,782.0(Inc)/dec in Investments -19.2 -100.0 -100.0
-100.0(Inc)/dec in Fixed Assets -4,133.9 -4,300.0 -2,700.0
-3,000.0Others 735.2 50.0 50.0 50.0CF from investing activities
-3,417.8 -4,350.0 -2,750.0 -3,050.0Issue/(Buy back) of Equity 0.0
-0.4 0.0 0.0Inc/(dec) in loan funds 4,310.4 5,950.0 2,500.0
-2,500.0Dividend paid & dividend tax -240.0 -367.3 -367.3
-452.1Inc/(dec) in Sec. premium -428.2 -1,801.5 0.0 0.0Others -90.9
0.0 0.0 0.0CF from financing activities 3,551.3 3,780.8 2,132.7
-2,952.1Net Cash flow -1,179.3 1,813.4 582.1 -220.2Opening Cash
1,913.2 734.0 2,547.4 3,129.5Closing Cash 734.0 2,547.4 3,129.5
2,909.4
Source: Company, ICICIdirect.com Research
Balance sheet (| crore)(Year-end March) FY16 FY17E FY18E
FY19ELiabilitiesShare Capital 1,067.2 1,066.8 1,066.8
1,066.8Reserve and Surplus 20,576.7 22,062.2 25,864.2 30,123.2Total
Shareholders funds 21,643.9 23,128.9 26,930.9 31,190.0Total Debt
39,195.0 45,145.0 47,645.0 45,145.0Deferred Tax Liability 1,420.2
3,991.7 3,991.7 3,991.7Minority Interest / Others 794.4 844.4 894.4
944.4Total Liabilities 63,053.5 73,110.0 79,462.0 81,271.1
AssetsGross Block 82,944.3 89,244.3 91,844.3 94,644.3Less: Acc
Depreciation 27,846.9 31,399.2 35,113.5 39,076.3Net Block 55,097.4
57,845.1 56,730.8 55,568.0Capital WIP 4,704.7 2,704.7 2,804.7
3,004.7Total Fixed Assets 59,802.1 60,549.8 59,535.6
58,572.7Investments 618.4 718.4 818.4 918.4Inventory 8,403.4
12,885.8 17,892.4 19,603.3Debtors 2,801.6 5,043.4 7,384.7
8,092.1Loans and Advances 7,904.7 14,554.7 14,479.7 15,838.5Other
Current Assets 799.0 1,074.0 1,484.0 1,694.0Cash 734.0 2,547.4
3,129.5 2,909.4Total Current Assets 20,642.7 36,105.3 44,370.4
48,137.2Current Liabilities 18,963.2 25,217.0 26,215.9
27,310.7Provisions 278.0 278.0 278.0 278.0Total Current Liabilities
19,241.1 25,494.9 26,493.8 27,588.6Net Current Assets 1,401.5
10,610.3 17,876.6 20,548.6Others Assets 1,231.4 1,231.4 1,231.4
1,231.4Application of Funds 63,053.5 73,110.0 79,462.0 81,271.1
Source: Company, ICICIdirect.com Research
Key ratios (Year-end March) FY16 FY17E FY18E FY19EPer share data
(|)Adj EPS 5.7 15.1 17.2 19.5Cash EPS 10.1 29.8 32.6 35.9BV 89.5
95.7 111.4 129.0DPS 0.8 1.2 1.2 1.5Cash Per Share 3.0 10.5 12.9
12.0Operating Ratios (%)EBITDA Margin 14.5 22.1 20.6 20.4PBT /
Total Operating income -0.6 9.5 9.2 9.5Adj PAT Margin 3.3 6.4 6.2
6.4Inventory days 135 160 175 175Debtor days 24 32 40 40Creditor
days 165 160 142 135Return Ratios (%)Adj RoE 6.4 15.8 15.5 15.1Adj
RoCE 4.8 13.5 14.0 15.1RoIC 4.8 14.0 14.2 15.2Valuation Ratios
(x)P/E 33.7 12.8 11.2 9.9EV / EBITDA 14.0 7.0 6.6 5.9EV / Net Sales
2.0 1.6 1.4 1.2Market Cap / Sales 1.1 0.8 0.7 0.6Price to Book
Value 2.2 2.0 1.7 1.5Solvency RatiosDebt/EBITDA 6.5 3.5 3.4 3.0Debt
/ Equity 1.8 2.0 1.8 1.4Current Ratio 1.1 1.4 1.7 1.8Quick Ratio
0.6 0.9 1.0 1.0
Source: Company, ICICIdirect.com Research
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ICICI Securities Ltd | Retail Equity Research Page 8
ICICIdirect.com coverage universe (Metals & Mining) CMP M
Cap
(|) TP (|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16
FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
Coal India 325 340 Buy 204966 22.6 21.2 24.3 13.1 13.9 12.1 7.8
8.2 7.1 45.0 45.9 55.0 42.1 41.7 49.9
Hindalco Industries 182 165 Hold 37593 1.3 12.3 16.0 137.2 14.2
11.0 9.8 7.3 6.4 4.3 6.6 7.5 0.7 6.2 7.5
Hindustan Zinc 314 300 Hold 132538 19.3 20.7 26.0 14.2 13.3 10.6
12.2 9.4 6.6 21.6 23.1 25.4 21.8 20.1 21.7
JSW Steel 193 200 Hold 46712 5.7 15.1 17.2 33.7 12.8 11.2 14.0
7.0 6.6 4.8 13.5 14.0 6.4 15.8 15.5
SAIL 62 60 Hold 25567 -10.0 -5.9 -0.6 NA NA NA NA 62.6 13.6 -7.9
-2.0 2.1 -10.0 -6.5 -0.7
Vedanta 248 205 Hold 73532 7.3 12.4 16.1 30.3 17.8 13.7 8.6 7.0
5.9 6.5 9.2 11.0 4.8 7.9 9.6
Tata Steel 468 500 Hold 138821 -23.1 10.0 51.3 NA 47.7 9.3 16.8
8.8 7.0 2.1 6.8 9.2 -7.3 3.1 14.3
ROCE(%)Company
EV/EBITDA (x)EPS (|) P/E (x) ROE(%)
Source: Company, ICICIdirect.com Research
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ICICI Securities Ltd | Retail Equity Research Page 11
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its stocks according to their notional target price vs. current
market price and then categorises them as Strong Buy, Buy, Hold and
Sell. The performance horizon is two years unless specified and the
notional target price is defined as the analysts' valuation for a
stock. Strong Buy: >15%/20% for large caps/midcaps,
respectively, with high conviction; Buy: >10%/15% for large
caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or
more;
Pankaj Pandey Head – Research
[email protected]
ICICIdirect.com Research Desk, ICICI Securities Limited, 1st
Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai
– 400 093
[email protected]
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ICICI Securities Ltd | Retail Equity Research Page 12
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