JINDAL STEEL & POWER LTD

Jindal Steel & Power (JSPL) has announced its results for the quarter ended September

2010. It has reported consolidated net profit of Rs 8,942mn as against Rs 8,084mn, a

growth of 10.6% on a Y-o-Y basis. Consolidated net sales jumped 25.36% to Rs 30,780mn

from Rs 24,556mn on Y-o-Y basis. On a Q-o-Q basis, net revenues

while the net profit was same as last quarter.

The key takeaways from the result are

• The revenues from Iron and steel business increased by 46%

from 15070mn. The revenues from Power segment declined around 1%

10,386 from Rs. 11,091mn.

• Total income increased to Rs 30,858mn during the quarter ended 30 September

2010 from Rs 24,578mn in the quarter ended 30 September 2009.

• Steel production rose 24% to about 562,000 metric tonne, while the

customized steel increased 15% to 462,429 MT. Power p

to 780miliion units.

• Two units of 135 megawatts, one unit has been commercially commissioned and

second unit has been synchronized in stabilization phase.

capacity utilization even during the stabilization

Based on a consolidated FY12 P/E multiple of 16

company works out to Rs 776.

Financial Snapshot

Projections (Rs. Mn) Q2FY10 Q2FY11

Net Revenue 24,556 30,780

Total Income 24,758 30,858

EBIDTA 13,362 15,054

EBIDTA % 54% 49%

PAT after MI 8,084 8,942

NPM % 33% 29%

EPS Rs 8.69 9.45

BVPS Rs

ROE %

PER x

P/B Ratio

JINDAL STEEL & POWER LTD HOLD

(JSPL) has announced its results for the quarter ended September

2010. It has reported consolidated net profit of Rs 8,942mn as against Rs 8,084mn, a

basis. Consolidated net sales jumped 25.36% to Rs 30,780mn

basis, net revenues increased by 3% Q-o-Q

The revenues from Iron and steel business increased by 46% Y-o-Y to Rs. 21,967mn

The revenues from Power segment declined around 1% Y-o-Y to Rs.

mn during the quarter ended 30 September

in the quarter ended 30 September 2009.

o about 562,000 metric tonne, while the sale of

. Power production is also up by 11%

Two units of 135 megawatts, one unit has been commercially commissioned and

ized in stabilization phase. It has achieved 100%

olidated FY12 P/E multiple of 16, the fair value for the Power profits to decline due to fall in merchant power rates

Q2FY11 % chg FY09A FY10A

30,780 25% 108,510 110,915

30,858 25% 109,134 111,518

15,054 13% 52,318 59,080

49% 48% 53%

8,942 11% 30,457 35,730

29% 28% 32%

9.45 9% 32.61 38.26

75 111

43% 35%

BSE / NSE Code

CMP Rs (29th Oct’10)

Market Cap ( Rs mn)

52 Week High-low

JSPL

Sensex

Nifty

STOCK RETURN (%)

STOCK DATA

Recommendations

Strong Buy

Buy

Hold

Reduce

Sell

Strong Buy – Expected Returns > 20% p.a.

Buy – Expected Returns from 10 to 20% p.a.

Hold – Expected Returns from 0 % to 10% p.a.

Reduce – Expected Returns from 0 % to 10% p.a. with possible

downside risk

Sell – Returns < 0 %

October 30, 2010

to decline due to fall in merchant

% chg FY11E FY12E

2% 130,783 155,109

2% 131,914 156,169

13% 62,894 74,312

48% 48%

17% 36,477 45,298

28% 29%

17% 39.06 48.50

48% 149 196

27% 25%

17.8 14.4

4.7 3.6

30D 3M 6M 1Y

-1% 12% -6% 4%

0% 11% 14% 25%

0% 11% 15% 27%

755/ 550

532286/ JINDALSTEL

697

650,865

<= 1 year 1 - 2 yrs 2 - 5 yrs

Expected Returns > 20% p.a.

Expected Returns from 10 to 20% p.a.

Expected Returns from 0 % to 10% p.a.

Expected Returns from 0 % to 10% p.a. with possible

OTHER HIGHLIGHTS

During the quarter the production of Sponge iron stood at 311,474 MT as compared to 320,349 MT in same quarter last

year, registering a decline of 3%. Customized steel production stood at 562,530 MT registering a growth of 24%

sale of sponge iron stood at 28,825 MT as against 86,014 MT down by 66% on

to higher captive consumption. Customized steel products sales registered a growth of 15% to 462,429 MT as compared to

401,248 MT on Y-o-Y basis.

In addition to this, power generation stood at 780 million units registering a growth of 11%

segment declined by 21% Y-o-Y to 180 million units from 227 million units. This decline was due to lower demand in rainy

season.

In H2FY11, it is expected that the pellet plant which has started production will achieve 100% capacity utilization. Also

the two 135 MW power plant which was commissioned recently will start generating power and the effect will be seen in

coming quarters.

We estimate JSPL’s revenues to grow at a CAGR of 18% over FY2010

PAT would grow at a CAGR of 13% over FY2010-12 to Rs 45bn in FY2012 from Rs

Based on a consolidated FY12 P/E multiple of 16

We recommend a ‘HOLD’ rating on the stock.

Financial Analysis and Projections

Particulars (Rs Mn)

Net Revenue

Other Income

Total Income

Operating Expenditure

Depreciation

EBIT

EBIT Margin (%)

Interest

Profit Before Tax

Less: Tax

PAT after MI

PAT Margin (%)

ROE (%)

EPS (Rs)

BVPS (Rs)

Valuation Ratios (x)

P/E

P/B

During the quarter the production of Sponge iron stood at 311,474 MT as compared to 320,349 MT in same quarter last

l production stood at 562,530 MT registering a growth of 24% Y-o-Y. The

sale of sponge iron stood at 28,825 MT as against 86,014 MT down by 66% on Y-o-Y basis. Sponge iron sale was down due

. Customized steel products sales registered a growth of 15% to 462,429 MT as compared to

power generation stood at 780 million units registering a growth of 11% Y-o-Y. Sales of power

to 180 million units from 227 million units. This decline was due to lower demand in rainy

it is expected that the pellet plant which has started production will achieve 100% capacity utilization. Also

ower plant which was commissioned recently will start generating power and the effect will be seen in

18% over FY2010-12 to Rs 155bn by FY2012. We further estimate that

bn in FY2012 from Rs 36bn in FY2010.

olidated FY12 P/E multiple of 16, the fair value for the company works out to Rs 776

Financial Analysis and Projections

FY08A FY09A FY10A FY11E FY12E

54,890 108,510 110,915 130,783 155,109

498 624 603 1,131 1,060

55,387 109,134 111,518 131,914 156,169

32,858 56,816 52,438 69,020 81,857

4,793 9,641 9,970 8,998 11,480

17,737 42,678 49,110 53,896 62,831

32% 39% 44% 41% 41%

2,545 4,567 3,576 7,565 5,523

15,193 38,111 45,535 46,331 57,309

2,681 8,040 9,189 9,100 11,256

12,740 30,457 35,730 36,477 45,298

23% 28% 32% 28% 29%

33% 43% 35% 27% 25%

13.64 32.61 38.26 39.06 48.50

41 75 111 149 196

FY11E FY12E

17.8 14.4

4.7 3.6

October 30, 2010

During the quarter the production of Sponge iron stood at 311,474 MT as compared to 320,349 MT in same quarter last

The

ponge iron sale was down due

. Customized steel products sales registered a growth of 15% to 462,429 MT as compared to

power

to 180 million units from 227 million units. This decline was due to lower demand in rainy

it is expected that the pellet plant which has started production will achieve 100% capacity utilization. Also

ower plant which was commissioned recently will start generating power and the effect will be seen in

bn by FY2012. We further estimate that

the company works out to Rs 776.

Q2FY11 standalone revenue of Rs23bn was marginally higher than market estimate of Rs22.5bn Sponge iron sale was down due to higher captive consumption Due sluggish thermal power demand in the monsoon quarter, JPL shutdown two of its 250 MW units for maintenance for 15 and 17 days.