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Buy JSW Steel – ShareKhan and HDFC

June 15, 2007

Their are BUY reports coming from HDFC Securities and Sharekhan on JSW Steel. The company has lined up a 2.6x jump in capacity over FY06-10 to 10mtpa, which would arguably make it the second largest steel manufacturer in India.

JSWS embarks on a Rs170bn expansion over the next few years, Sharekhan does not expect debt-equity ratio to cross 1.1x. JSWS has a track record of strong project execution and has also been able to bring down specific investment cost per tonne with each phase of expansion.

At 5.5x FY08E earnings, we see room for further appreciation in the stock price. Notably, JSWS offers significant volume growth over the next few years, and hence is not a pure leverage story on steel prices. However, considering the scale and growth visibility, SSKI analyst believes that the stock deserves to trade at a premium to peers. SSKI / Sharekhan initiates coverage on JSWS with a price target of Rs 729 per share.

JSW Steel is expected to report an EPS of Rs 103.3 for FY08 and Rs 112.5 for FY09.

Note from Dalal Street Business:
JSW Steel is at the top of Holding List of Sr. Fund Manager, Sunil Singhania @ Reliance Fund.

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