JSPL reported consolidated net income for 1QFY2010 at Rs9.9bn, up 123% yoy, in-line with expectations. The steel business delivered an EBITDA of Rs5.6bn. A third consecutive quarter of strong merchant power tariffs (> Rs 6/kwh), gives yet more evidence of the structurally under-supplied nature of Indian power markets. Steel business is on track to deliver volume growth of 30% in FY10E.
JSPL’s new 1,350MW capacity power plant is on track for phased commissioning from Dec 09 onwards and will start contributing to earnings from FY11E onwards. Power division EBITDA stood at Rs10.4bn, up 3% QoQ and 15% ahead of expectation.
Goldman has a Buy rating on the stock and our SOTP based 12-month TP of Rs 3,530. The stock is currently trading at 3.1x FY11E P/B, and offers FY11E RoE of 37% with FY09-12E EPS CAGR of 20%.