JSW Steel -Good Results – Buy or Sell ?

JSW reported consolidated net income of Rs6,110mn (+42% qoq) vs. a net loss of Rs399mn in 4QFY09. Net profit was 7% above our expectation and 10% above Reuters consensus, even after adjusting for a one-off forex gain of Rs964mn. For FY2010E, JSW reported net income of Rs15.9 bn (+481% yoy)

EBITDA/t was up 11% QoQ to US$185/t, 4% ahead of our est.. Realizations were up 4% QoQ, marginally below our est. Input cost/ton was up 5% QoQ due to higher iron ore prices. 4Q volumes were inline at 1.52mn tons (FY10 5.7mn tons) US plates and pipes subsidiary turned around in 4Q reporting EBIDTA of US$2.2mn (loss of US$8.3mn in 3Q). This was led by recovery in plates mill utilization to 28% during 4Q (20% in 3Q).

JSW has announced that its board has approved the acquisition of a USA based coking coal mine with an estimated resource base of 123mt for up to US$100m. Board of Directors has also approved the terms for an issue of 17.5m warrants to Promoters which represents 9.36% of share capital.

Earnings Estimate for FY 11 and 12 of JSW Steel:
BOFA Merrill – Rs 92.86 121.03
Morgan Stanley – 106.40 156.49
JP Morgan Rs 92.3 108.7
Credit suisse – Rs 89 116