JSW Steel - 2QFY2016 Result Update - Angel Broking

Steel price declines hurt margins: JSW Steel's standalone revenues for 2QFY2016 come in at Rs. 9,653cr, in line with our estimate of Rs. 9,345cr. Raw Material expenses for the quarter, at ~Rs. 5,458cr, are 2.5% below our expectation, led by decline in iron ore and coking coal prices. The EBITDA however declined by 40% yoy, owing to a sharp decline in steel prices.

Strong performance of subsidiaries: During the quarter, Coated Products' revenues came in ahead of our expectations at Rs. 1,927cr on account of higher realizations, while the segment's EBITDA rose by 5.3% yoy to Rs. 102cr as against our expectations of Rs. 60cr. The company's Chilean operations posted an EBITDA loss of $0.48mn as against a loss of $1.76mn in 2QFY2015, which is in line with the guidance. The company's plate and pipe mill business in the US reported an EBITDA loss of $3.1mn, lower than our expectation of a EBITDA loss of $8.5mn.

Outlook: The company's results for the quarter are marginally better than our expectations, but the outlook on steel prices continues to remain weak. Pressure from imports and slowdown in China remain key concerns for the domestic steel industry. At the current price of Rs. 906, the stock trades at 7x FY2017 EV/EBITDA; we retain our Neutral rating on the stock.

Shares of JSW STEEL LTD. was last trading in BSE at Rs.916.95 as compared to the previous close of Rs. 905.8. The total number of shares traded during the day was 147712 in over 5350 trades.

The stock hit an intraday high of Rs. 920 and intraday low of 902.5. The net turnover during the day was Rs. 134906172.

Source : Equity Bulls

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