Hold on JSW Steel – TP Rs.616 - Geojit BNP Paribas Financial Services Limited

Company's stand-alone results for 3QFY12 surprised positively. Recurring PAT at Rs.320 crore is well ahead of market expectations, led by better than expected revenue.

EBITDA was also better than market estimates and forex loss of Rs.500 crore is in line with market expectations.

Topline growth was higher than expectations led by better than expected sales volume and higher than expected price realisatiion.

EBITDA/ ton at Rs.6565 is better than estimates but interest cost surprised negatively due to rising Libor rates and rupee depreciation.

Though the stand-alone result is positive, some negatives could be expected in the consolidated result due to the shutdown of its US facilities in December and suspension of iron ore shipments from Chile.

It also seems that there is risk of asset write-down at its US pipe and plate mill, where the company plans to organize an independent valuation.

Estimates and target price will be revisited after the consolidated results.

The outlook on the stock is cautious given the risk of asset write-down, lack of clarity on iron ore availability and uncertainty on Ispat's profitability.

Source : Equity Bulls

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