Company Overview

JSW Steel Ltd., belonging to JSW group, part of the O P Jindal Group, is one of the lowest cost steel producers in the world. The group has diversified interest in mining, carbon steel, power, industrial gases, and Port facilities, Aluminium, Cement and Information Technology. JSW Steel Limited is engaged in manufacture of flat and long products viz. H R Coils, C R Coils, Galvanized products, auto grade & white goods grade CRCA Steel, Bars and Rods. Company was incorporated in 1994. JSW Steel Limited has the largest galvanizing and colour coating production capacity in the country and is the largest exporter of galvanized products with presence in over 74 countries across five continents. Its manufacturing facilities are located at vijaynagar, vasind & tarapur , salem, bellary. The Jindal Group took a lead in adopting the latest technology of steel making for JSW steel, known as 'COREX,' developed by Voest Alpine of Austria. Then JVSL was the first greenfield project to have 'COREX' as a mainstream facility. The number of JSW Shoppe outlets went up to 174 and retail sales for the current fiscal, through JSW Shoppe accounted for 16% of domestic sales.

Products & Services—

JSW Steel Ltd. is one among the largest Indian Steel Companies in India today with capacity of 7.8MT. India’s second largest steelmaker, JSW Steel Ltd. consists of the most modern, eco-friendly steel plants with the latest technologies for both upstream & downstream processes. JSW Steel Ltd. has received all the three certificates - ISO:9001 for Quality Management System, ISO:14001 for Environment Management System, OHSAS:18001 for Occupational Health & Safety Management System.

JSW Steel Ltd is today a fully integrated steel plant having units across Karnataka and Maharashtra producing from pellets to color coated steel. It has an integrated steel plant to manufacture hot-rolled coils at Torangallu, Karnataka, which includes a pellet plant at an estimated cost of Rs 300 crores. It is one of the few steel manufacturers in the world to follow the Corex process for production of hot metal. Posco and Saldanha are two other companies using the corex process. Company is the first steel company in India to implement a total integrated resource planning solution for its business process. The modules involved in its ERP project are materials management, steel process tracking system, computer managed maintenance system, Oracle financials and product costing. Company exports about 70% of the galvanized coils manufactured from the company’s facilities in Tarapur and Vasind in Maharashtra. Company will expand the capacity of its Bellary plant in Karnataka to 10 million ton per annum by 2010 from 3.6 million ton at present at an investment of Rs 50 billion. The Karnataka government and the company have reached an agreement for allotment of 4,000 acres of land for the expansion of the project.

Recent developments—

Company has successfully commissioned the Phase I (3.5 Mtpa) of the state of the art largest and widest new Hot Strip Mill at Vijaynagar on March 28, 2010. After successful trial operations, the mill has commenced commercial production on April 10, 2010 and it would enable the company to convert all slabs into value added HR Coils, on its stabilization. On completion of Phase II, the capacity of mill will go up to 5 Mtpa. The expansion project execution work is progressing in full swing to expand the crude steel capacity to 10 Mtpa and to set up 300 MW power plants at Vijaynagar works, to be commissioned in FY 2011 and FY 2012 respectively.

The Board has approved issuance of warrants to promoters to 17.5 million (9.4% of existing share capital). The total equity infusion is likely to be around Rs 2100 crore. This is largely done to strengthen the balance sheet and fund the projects in West Bengal and Jharkhand.

JSW Steel has bought coking coal mines in the West Virginia, USA for US$100mn. The coking coal mines have total reserves of 123mn tons. One of the mines is operational while the others will be ready in 24 months. Total number of mines has not been disclosed. JSW plans to raise coking coal production at the mine from 1mn ton to 3mn ton in three years.

Financials—

JSW Steel announced its Q4 results with net profit at Rs71695 lakhs registering a growth of 45% and sales grew by 55% at Rs 516707 lakh. For the financial year ended 31st March 2010, the company has shown significant growth in volumes of 61% in crude steel production and 67% in saleable steel.

Valuation—

Recently, company guided for production and sales of 7 Mt and 6.75 Mt respectively for FY2011. At current market price, stock is trading at 6.4 X multiple of its FY2011 Estimated EPS. We recommend investors to strong buy”JSW Steel Limited” for medium to long-term investment horizon.