*JSW Steel Ltd. Concall Update – Q2FY22*
(Nirmal Bang Retail Research)
*Outlook – Positive*
*Management remains optimistic about the demand in the H2FY22 on the back of improvements in construction and infrastructure projects. Coking coal cost to increase by $95-100 (in Q2 average cost was $158) As such at current price there will be further increase in coking coal cost in Q4. Decline in Iron Ore price of Rs.1800/T to partially compensate the increase in Coking Coal Cost. Company has taken Rs.1500/T price increase in Flat and Rs.3000/T in long product in the month of Oct. The Imported Thermal Coal cost increase will also increase the power cost for Company.*
*Apart from this company will have higher volume of 1.4mn from Dolvi Expansion in H2FY22. The Bhushan Power which was reported as associate company up till now will be consolidated as subsidiary from Q3. Bhushan Power has done EBITDA of Rs.2022cr in Q2FY22 and has debt of Rs.10000cr.*
• Operated at 91% capacity utilization, given planned shutdowns at Vijayanagar and Salem.
• Sales volumes were higher by 5% QoQ, driven by higher Exports which increased by 26% QoQ driven by robust demand in the global economy. Exports contributed 35% of total sales for this quarter.
• Net sales realisation increased by 5% QoQ, driven by higher realizations from export and domestic markets and further enhanced by improved sales mix.
• Other income was higher on account of recognition of fair valuation gain on re-measurement of optionally fully convertible debentures held by the Company in one of the Joint Venture.
• The iron ore prices are expected to fall further on supply improvement.
• Rising coking coal prices is a concern but the management expects to see some softening going forward.
• The share of VASP increased to 60% during the quarter compared to 51% in Q1FY22.
*Guidance:*
• Management remain confident of delivering the production as per the earlier guidance of 17-18mnt for FY22.
*Expansion Update:*
• The company commissioned 5MTPA Dolvi plant and ramp-up is under way. This plant is expected to produce 1.5mnt of steel and sales volume is guided at 1.4mnt for the H2
• 5 MTPA brownfield project at Vijayanagar shall be completed by FY24.
• Commissioning of the second line at CRM-1 at Vijayanagar likely by Q3FY22
• 0.45 MTPA galvanising line at Vasind to be commissioned in Q3FY22.
• 0.5 MTPA continuous annealing line to be commissioned by Q4FY22.
• Second 0.25 MTPA tin plate line at Tarapur likely to commence by Jun'22.