Jindal Steel & Power - March 2013 Results Preview - Motilal Oswal

- Net sales to decrease 5% YoY on lower realization: We expect standalone net sales to decline 5% YoY (up 4% QoQ) to INR39.8b on lower steel realizations, compared to 4QFY12. Steel sales volume would increase 1% YoY (1% QoQ) to 741k tons. We expect pellet sales volume to decline 25% YoY (down 17% QoQ). Power sales are likely to grow 27% YoY (up 18% QoQ) to 709m units. We expect standalone EBITDA to decline 16% QoQ to INR10.7b due lower high margin pellet sales.

- Jindal Power's sales volume to improve 9% QoQ after partial easing of evacuation problems: Power sales volumes at Jindal Power are likely to increase 9% QoQ (down 9% YoY) to 1.8b units, while the average rate is likely to increase 4% QoQ to INR3.5/unit. PAT would grow 14% QoQ to INR2.9b.

- Earnings have peaked; Maintain Sell: JSP's existing operating assets continue to deliver superior results, but future projects are likely to have lower return ratios. We believe that earnings have already peaked and expect them to remain flat over FY12-15E. The stock trades at 8.4x FY15E EPS, and an EV of 6.4x FY15E EBITDA. Maintain Sell.

Source : Equity Bulls

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