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JSW Steel + Gujarat NRE Coke – Macquarie Research

October 16, 2007

JSW Steel: Global commodities team has revised steel price forecasts upward by 6% and 2% for FY3/09 and FY3/10, respectively, while also increasing iron ore forecasts by 20% each year, and for coking coal by 8% and 5% for FY3/09 and FY3/10, respectively. JSW has recently been allocated 69% in a coking coal mine with mineable reserves of 250mt while it explores for more reserves in Mozambique. It expects to reach 50% self sufficiency in the next 3–4years.

Revising EPS estimates for FY3/08–FY3/10 by 7.5%, 29.2% and 0.3% to Rs100.6, Rs120.3 and Rs160.2 respectively. Increasing the target price to Rs1,203, based on a PER of 10x FY3/09E EPS.

Gujarat NRE Coke:
Global commodities team has upgraded coking coal price forecasts for FY09-11 by 13%, 10% and 6% to US$135/t, US$110/t and US$95/t, respectively.GNC is looking to double its coking coal production to 1mt in FY09, with the completion of purchase of Elouera mine by December 2007. GNC is merging its two mining subsidiaries listed in Australia. This, we believe, will lead to reduction of discount, as the merged entity will be a multi-mine, multi-location company with lower risks.

Revising EPS estimates for FY3/09–FY3/10 by 7.5% and 12.2% to Rs8.1 and Rs8.8 respectively. 12-month price target: Rs140.00 based on a DCF methodology.

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