Result Update

February 2, 2016
Rating matrix

JSW Steel (JINVIJ)

Rating
Target

:
:

Sell
| 900

Target Period
Potential Upside

:
:

12 months
-14%

Muted performance

Whats Changed?
Target
EPS FY16E
EPS FY17E
Rating

Changed from | 950 to | 900

Changed from | 38.8 to | -4.5
Changed from | 78.8 to | 63.8
Changed from Hold to Sell

Quarterly Performance (Consolidated)

Revenue
EBITDA
EBITDA (%)
PAT

Q3FY16 Q3FY15 YoY (%) Q2FY16 QoQ (%)

8,698.3 13,223.0
-34.2 10,906.9
-20.2
891.8 2,295.7
-61.2 1,729.3
-48.4
10.3
17.4 -711 bps
15.9 -560 bps
-923.3
328.9
PL
117.0
PL

Key Financials
(| Crore)
Total Op. Income
EBITDA
Adj Net Profit
Adj EPS (|)

FY14
51219.6
9165.5
2164.7
89.6

FY15
52971.5
9402.3
1843.7
76.3

FY16E
41854.5
5802.9
-108.4
-4.5

FY17E
54235.5
9724.2
1542.8
63.8

FY15
13.8
11.8
6.2
1.1
8.0
10.3

FY16E
NA
NA
11.4
1.2
-0.5
3.9

FY17E
16.5
14.1
6.4
1.1
6.7
9.2

Valuation summary
PE (x)
Target PE (x)
EV/EBITDA (x)
P/BV (x)
Adj RoNW (%)
Adj RoCE (%)

FY14
11.7
10.1
6.5
1.2
9.9
10.6

Stock data
Particular
Market Capitalisation
Debt-Cons. (FY15)
Cash Cons. (FY15)
EV
52 week H/L
Equity capital
Face value

Amount
| 25379 crore
| 34885 crore
| 1913 crore
| 58350 crore
| 1127 / 800
| 241.72 crore
| 10

Price performance (%)

Return %
JSW Steel
SAIL
Tata Steel

1M
2.3
-11.4
-3.1

3M
15.4
-20.0
1.1

6M
26.4
-24.0
1.0

| 1050

12M
7.5
-44.7
-36.2

Research Analyst
Dewang Sanghavi
dewang.sanghavi@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

JSW Steel reported a subdued set of Q3FY16 numbers wherein

the topline, EBITDA and PAT came in notably lower than our
estimates. Lower-than-expected sales volume and muted steel
prices impacted the performance for the quarter. Bottomline for
the quarter was impacted by impairment charges taken by JSW
Consolidated topline for the quarter came in at | 8698.3 crore
(down 34.2% YoY, 20.2% QoQ and lower than our estimate of
| 8901.2 crore). Steel volumes were at 2.55 million tonnes (MT)
lower than our estimate of 2.70 MT. Consolidated EBITDA came in
at | 891.8 crore (down 61.2% YoY, 48.4% QoQ and lower than
our estimate of | 1205.4 crore). Consolidated EBITDA margin for
the quarter was at 10.3% lower than our estimate of 13.5%.
EBITDA/tonne was at | 3443/tonne significantly lower than our
estimate of | 4500/tonne. Shutdown of blast furnaces at
Vijaynagar and Dolvi impacted EBITDA by ~| 300 crore (by
~| 1176/tonne). The company lost production and sales of 0.6 MT
on account of closure of blast furnaces in Q3FY16
During the quarter, the company recorded impairment charges of
| 2121 crore towards fixed assets, goodwill and other assets
comprising | 905 crore for its US operations of plate & pipe mill,
| 172 crore for its coal mines operations in the US and | 1045
crore for its iron ore mines operations in Chile, leading to a
downward revision of the carrying value. The ensuing net loss
after tax for the quarter was at | 923 crore, after incorporating the
financials of subsidiaries, joint ventures and associates (our
estimate of net loss of | 351 crore)

Pares down FY16E production and sales guidance by ~5-6%

For FY16E, JSW Steel revised downwards production and sales guidance
by ~5-6%. The revised production and sales guidance for FY16E are at
~12.7 MT and ~12.2 MT, respectively, lower than the initial guidance of
13.4 MT and 12.9 MT, respectively. There is expected to be a slight delay
(~two months) in restarting the blast furnaces leading to lower volume
and sales guidance for FY16E.
Elevated debt level remains area of concern
Post the merger with Ispat Industries, the debt level of JSW Steel has
increased significantly. On a consolidated basis, at the end of Q3FY16, the
net gearing was at 1.83x while net debt to EBITDA was at 6.66x. On a
standalone basis, at the end of Q3FY16, net gearing was at 1.48x while
net debt to EBITDA was at 5.67x.
Downward revise EBITDA/tonne estimates; downgrade to SELL
On the back of subdued sales volume and muted steel prices JSW Steel
reported a subdued Q2FY16. Subsequently, we have downward revised
our FY16E EBITDA/tonne estimates to | 4500/tonne (from | 6000/tonne
earlier) and FY17E EBITDA/tonne to | 6750/tonne (from | 7000/tonne
earlier). As the company has downward revised volume guidance, we
have also downward revised FY16E volume assumption to 12.0 MT from
12.6 MT earlier. Consequently, we downward revise our FY16E EBITDA
by 29.0% and FY17E EBITDA by 3.4%. Going forward, we value the stock
at 6x FY17E EV/EBITDA and arrive at a target price of | 900. We have a
SELL recommendation on the stock.

Variance analysis
Q3FY16 Q3FY16E

Q3FY15

Revenue
Other Income
Employee Expense
Raw Material Expense
Power & Fuel Expense
Other operating Expenses

8,698.3
22.6
368.2
4,903.5
671.6
1,863.2

8,901.2 13,223.0
30.0
13.0
384.9
391.1
4,958.2 7,286.2
906.2 1,003.0
1,446.5 2,246.9

EBITDA
EBITDA Margin (%)
Depreciation
Interest
Exceptional Item
PBT
Tax Outgo
PAT
Minority Interest, Share of Associate
&Extra Ordinary Item
PAT for the Group
Key Metrics
Steel Sales (MT)
Standalone EBITDA/tonne (|/tonne)

891.8
10.3
773.4
810.7
2,122.1
-2,791.7
-1,810.0
-981.7

1,205.4
13.5
919.2
842.3
0.0
-526.1
-157.8
-368.3

58.4
-923.3

17.3
-351.0

22.1
328.9

2.6
3443

2.7
4500

3.0
6988

YoY (%)

Q2FY16 QoQ (%)

-34.2 10,906.9
73.9
39.0
-5.9
414.2
-32.7 5,839.6
-33.0
980.9
-17.1 1,942.9

2,295.7
-61.2
17.4 -711 bps
890.0
-13.1
936.6
-13.4
0.0
PL
482.1
-679.1
175.3 -1,132.5
306.8
-420.0

-20.2
-42.0
-11.1
-16.0
-31.5
-4.1

Comments
Topline came in lower than our estimate on the back of muted sales
volume
Employee expense came in broadly lower than our estimate
Raw material expense came in broadly in line with our estimate
Power and fuel expense came in lower than our estimate
Other operating expense came in higher than our estimate
EBITDA came in lower than our estimate
Consolidated EBITDA margin came in lower than our estimate
Depreciation came in higher than our estimate
Interest expense came in broadly in line with our estimate
Exceptional item represents impairment charge taken

1,729.3
15.9
682.2
836.3
1.4
248.3
142.4
106.0

-48.4
-560 bps
13.4
-3.1
NA
-1,224.2
-1,371.5
-1,026.4

164.2
PL

11.0
117.0

430.8
PL

Loss came in higher than our estimate

-15.0
-50.7

3.2
4908

-20.3
-29.8

Sales volume came in lower than our estimate

Reported EBITDA/tonne came in lower than our estimate

Source: Company, ICICIdirect.com Research

Change in estimates
(| Crore)
Revenue
EBITDA
EBITDA Margin (%)
EBITDA (|/tonne) *

Old
48,446
8,179
16.9
6000

FY16E
New
41,855
5,803
13.9
4500

% Change
-13.6
-29.0
-302 bps
-25.0

Old
56,463
10,063
17.8
7000

FY17E
New
54,235
9,724
17.9
6750

% Change
-3.9
-3.4
11 bps
-3.6

Comments
Downward revised topline estimate
Downward revised EBITDA estimate
Broadly maintained EBITDA margin estimate
Downward revised EBITDA/tonne estimate

Source: Company, ICICIdirect.com Research, *-Standalone entity

Assumptions

Total Steel Sales (MT)

EBITDA/tonne (|/tonne) *

FY13
8.9
7,089

FY15
12.0
7,375

Current
FY16E
FY17E
12.0
13.5
4,500
6,750

Earlier
Comments
FY16E
FY17E
12.6
13.5 Downward revised FY16E sales volume estimate
6,000
7,000 Downward revised FY16E and FY17E EBITDA/tonne estimate

Source: Company, ICICIdirect.com Research, *-Standalone entity

ICICI Securities Ltd | Retail Equity Research

Page 2

Company Analysis
JSW Steel, post its merger with JSW Ispat, got catapulted to the position
of one of the leading steel producers in India (combined steelmaking
capacity of 14.3 MT). In terms of capacity wise break-up, out of 14.3 MT,
10 MT is in Vijayanagar, Karnataka [8.4 MT through blast furnace (BF)
route with balance 1.6 MT through the Corex route], 3.3 MT in Dolvi,
Maharashtra (erstwhile Ispat Industries) and 1 MT in Salem, Tamil Nadu.
Pares down FY16E production and sales guidance by ~5-6%
For FY16E JSW Steel has revised downwards production and sales
guidance by ~5-6%. The revised production and sales guidance for
FY16E is at ~12.7 MT and ~12.2 MT, respectively, lower than the initial
guidance of 13.4 MT and 12.9 MT, respectively. There will be a slight
delay (~two months) in restarting the blast furnaces leading to lower
volume and sales guidance for FY16E.
Exhibit 1: Downward revise FY16E volume guidance
16.0
12.0

12.0

7375

7089

6750

7000

12.0

6000

8.9

4500

5000
|/tonne

8.0
6.0

4000
3000

4.0

2000

2.0

1000

0.0

0
FY13

FY15

FY16E

FY17E

FY13

Source: Company, ICICIdirect.com Research

FY15

FY16E

FY17E

Source: Company, ICICIdirect.com Research

Elevated debt level remains area of concern

Post the merger with Ispat Industries, the debt level of JSW Steel has
increased significantly. On a consolidated basis, at the end of Q3FY16, the
net gearing was at 1.83x while net debt to EBITDA was at 6.66x. On a
standalone basis, at the end of Q3FY16, net gearing was at 1.48x while
net debt to EBITDA was at 5.67x.
Exhibit 3: Gross debt & net debt trend
45000
40000
35000

36581

39185

40795

32971

15000

34099

20000

41985

25000
34762

| crore

30000
34885

million tonne

8000

13.5

14.0
10.0

Exhibit 2: ..EBITDA/tonne slides in FY16E due to muted steel prices

10000
5000
0
FY14

FY15
Gross Debt

FY16E

FY17E

Net Debt

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 3

Key takeaway from conference call

During the quarter, JSW Steels standalone operations took a provision of
| 5596 crore on account of a reduction of assessed value in use of foreign
subsidiaries (US plate and pipe mill, US coal mines and Chile iron ore
mines). Consolidated results witnessed an impairment of | 2121 crore.
The difference of | 3475 crore is accumulated losses already booked in
the consolidated results earlier.
Q4FY16 volumes are expected to increase ~25% QoQ as a result of
expected commissioning of expanded capacity.
Post completion of capacity addition, crude steel capacity of the company
will increase from14.3 million tonnes per annum (MTPA) currently to ~18
million tonnes per annum. The company will be able to operate the
capacity at 8590% once stabilised.
Standalone net worth of JSW Steel, as on date, is | 21502 crore while
consolidated net worth is |21570 crore.
The management has also largely maintained the capex guidance of
| 5200 crore for FY16E and | 3800 crore for FY17E. Revenue and capital
acceptances were US$1163 million and 459 million, respectively.
The company has breached the debt covenants yet again for the March
assessment and is in negotiation with the banks for an interim relaxation.
The Karnataka High Court, in its judgment on December 2, 2015, has
granted partial relief in response to a petition filed by JSW Steel (along
with other miners) against a levy of FDT by the state government of
Karnataka. Pending clarifications from the Monitoring Committee and
CEC, JSW Steel has not reversed the expenses recognised till date. The
company has guided that complete reversal of the provision made can
lead to | 1520.9 crore positive cash flow impact, out of which write-back
in the profit & loss statement is to the extent of | 825.4 crore.

ICICI Securities Ltd | Retail Equity Research

Page 4

Performance of subsidiaries
JSW Steel Coated Products
During the quarter, JSW Steel Coated Products registered production
(galvanised/galvalume products) volume of 0.33 MT and sales volume of
0.34 MT. The gross turnover and net sales for the quarter were at | 1629
crore and | 1506 crore, respectively. It recorded an operating EBITDA of
|38 crore and net loss after tax of | 22 crore for the quarter.
Chile iron ore mines
The Chile operations remain under care and maintenance from end April
2015. The company reported an EBITDA loss of US$0.32 million for the
quarter.
US plate and pipe mill
The US based pipe and plate mill facility produced 0.049 MT of plates and
0.013 MT of pipes, reporting capacity utilisation of 20% and 10%,
respectively, in Q3FY16. Sales volumes for the quarter were at 0.036 MT
of plates and 0.012 MT of pipes. The company has reported an EBITDA
loss of US$ 4.90 million for the quarter.
Project update
The Blast Furnace at Vijayanagar, which underwent a planned shutdown
for relining and modification from August 2015 onwards is expected to
get commissioned in Q4FY16. The blast furnace at Dolvi and one of the
blast furnaces at Salem also underwent a shutdown for capacity
expansion during the quarter and are likely to get commissioned in
Q4FY16. Other ongoing projects are progressing satisfactorily and are
likely to complete as per schedule.

ICICI Securities Ltd | Retail Equity Research

Page 5

Valuation
On the back of subdued sales volume and muted steel prices, JSW Steel
reported a subdued Q2FY16. Subsequently, we have downward revised
our FY16E EBITDA/tonne estimates to | 4500/tonne (from | 6000/tonne
earlier) and FY17E EBITDA/tonne to | 6750/tonne (from | 7000/tonne
earlier). As the company has downward revised volume guidance, we
have also downward revised FY16E volume assumption to 12.0 MT from
12.6 MT earlier. Consequently, we downward revise our FY16E EBITDA
by 29.0% and FY17E EBITDA by 3.4%. Going forward, we value the stock
at 6x FY17E EV/EBITDA and arrive at a target price of | 900, assigning a
SELL recommendation to the stock.
Exhibit 4: Target price calculation
Particular

Unit

Value

EBITDA (JSW Steel & Ispat Combined)

| crore

9724

EV/EBITDA Multiple

Enterprise Value (EV)

| crore

58345

Gross Debt

| crore

39185

Cash & Cash Eq

| crore

2604

Net Debt

| crore

36581

Implied Market Cap

| crore

21765

No of Shares

crore

24.2

Target Price

900

6.0

Source: Company, ICICIdirect.com Research

Exhibit 5: Valuation Matrix

FY14
FY15
FY16E
FY17E

Sales
(| Crore)
51219.6
52971.5
41854.5
54235.5

Growth
(% YoY)
34.5
3.4
-21.0
29.6

EPS Growth
(|) (% YoY)
89.6
50.0
76.3
-14.8
-4.5
PL
63.8 -1522.6

PE
(x)
11.7
13.8
NM
16.5

EV/EBIDTA
(x)
6.5
6.2
11.4
6.4

P/ BV
(x)
1.2
1.1
1.2
1.1

RoNW
(%)
9.9
8.0
-0.5
6.7

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 6

RoCE
(%)
10.6
10.3
3.9
9.2

Company snapshot
1,600
1,400
1,200
Target Price: 900

1,000
800
600
400
200

Jan-17

Oct-16

Jul-16

Apr-16

Jan-16

Oct-15

Jul-15

Apr-15

Jan-15

Oct-14

Jul-14

Apr-14

Jan-14

Oct-13

Jul-13

Apr-13

Jan-13

Oct-12

Jul-12

Apr-12

Jan-12

Oct-11

Jul-11

Apr-11

Jan-11

Oct-10

Jul-10

Apr-10

Jan-10

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date
Jan-08

Event
Acquires eight iron ore mines in Chile for a consideration of US$52 million

Mar-08

Government mulls over export tax on steel to curb domestic inflation and ensure supplies of finished steel in domestic markets. Speculation of government
regulating steel prices domestically
Global financial crisis adversely impacts the construction sector and capital spending. Production cuts across the globe to cater to subdued demand

Aug-08
Feb-09

May-10

Global coking coal miners announce price cuts due to demand pressures & weak outlook on steel. The government in its Budget announces excise duty reduction
from 10% to 8% and service tax rate reduction from 12% to 10%
Inks collaborative agreement with JFE Steel Corporation (Japan). Both companies, in principle, agree to collaborate in India in the area of automotive steel, including
production technologies and supply of substrate materials for hot rolled, cold rolled and galvanised products
Acquires coking coal mine in West Virginia, US for a total consideration of US$100 million

Dec-10

Acquires majority stake in Ispat Industries (capacity 3.3 MTPA) for a consideration of | 2157 crore

Nov-09

Mar-11

Coking coal price sky rocket touching highs of US$330/tonne on account of floods in Australia (Queensland)

Jun-11

Iron ore mining ban imposed in Karnataka with NMDC being the only miner allowed to mine under supervision of Supreme Court of India

Dec-11
Feb-12

Mines & Mineral (Development & Regulation) Bill introduced in Parliament. Proposes payment of amount equivalent to royalty for development of the areas in which
the miners operate. Export duty increased to 30% iron ore exports from India
JFE raises stake in JSW Steel to 15%

Sep-12

JSW Steel merges JSW Ispat with itself. Share swap ratio fixed at 1:72 i.e. for every 72 shares of JSW Ispat one would get one share of JSW Steel

Oct-13

Announces a price hike of ~| 2000/ tonne to mitigate the rising input costs (coking coal on account of currency depreciation)

Dec-13
Announces a price hike of ~2% (| 700-1000/tonne) for its steel products effective from January 1, 2014
Source: Company, ICICIdirect.com Research

Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10

Shareholding Pattern

Name
Jindal Organisation
JFE Steel Corporation
Vividh Consultancy & Advisory Services Pvt. Ltd.
M. M. Warburg Bank (Schweiz) AG
Sahyog Tradecorp Pvt. Ltd.
Danta Enterprises Pvt. Ltd.
Virtuous Tradecorp Pvt. Ltd.
JSW Techno Projects Management, Ltd.
Gagandeep Credit Capital Pvt. Ltd.
Dimensional Fund Advisors, L.P.

Latest Filing Date

30-Sep-2015
30-Sep-2015
30-Sep-2015
30-Sep-2015
30-Sep-2015
30-Sep-2015
30-Sep-2015
01-Sep-2015
30-Sep-2015
30-Nov-2015

% O/S
20.9
15.0
5.7
5.0
4.5
2.5
2.5
2.1
1.9
1.6

Value
67.8
62.4
34.4
6.0
4.7

Shares
5.0
4.6
2.5
0.4
0.3

Position
50.53M
36.26M
13.89M
12.12M
10.97M
6.04M
6.04M
4.99M
4.60M
3.89M

Change
4.6
0.0
0.0
0.0
0.0
0.0
0.0
5.0
0.4
0.0

(in %)
Sep-14 Dec-14 Mar-15
Promoter
39.6
40.0
40.0
FII
19.9
19.0
19.0
DII
4.1
4.2
4.2
Others
36.5
36.8
36.8

Jun-15
40.4
18.5
5.3
35.8

Sep-15
41.5
17.2
5.2
36.2

Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys
Investor name
JSW Techno Projects Management, Ltd.
Jindal Organisation
Amrit Petroleums Pvt. Ltd.
Gagandeep Credit Capital Pvt. Ltd.
HDFC Asset Management Co., Ltd.

Sells
Investor name
ICICI Prudential Asset Management Co. Ltd.
Schroder Investment Management (Hong Kong) Ltd.
BlackRock Institutional Trust Company, N.A.
Jain (Nirmal Kumar)
J.P. Morgan Asset Management (Hong Kong) Ltd.

Value
-4.4
-2.6
-1.5
-0.9
-0.8

Shares
-0.3
-0.2
-0.1
-0.1
-0.1

Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 7

Financial summary (Cons.)

Profit and loss statement
(Year-end March)
Total operating Income
Growth (%)
Raw Material Expenses
Employee Expenses
Power and Fuel Costs
Mfg and Other expenses
Total Operating Expenditure
EBITDA
Growth (%)
Depreciation
Interest
Other Income
PBT
Exceptional Item
Total Tax
Reported PAT Before MI
Profit/(loss) - JV/MI/Associate
Reported PAT After MI
Growth (%)
Adj PAT after MI
Adj 'EPS (|)

(| crore)
FY14
51,219.6
34.5
30,334.0
1,298.2
3,813.3
6,608.6
42,054.2
9,165.5
40.9
3,182.6
3,047.9
85.8
3,020.8
-1,712.8
920.1
388.0
64.0
451.9
-53.1
2,164.7
89.6

FY15
52,971.5
3.4
29,686.0
1,532.8
4,123.1
8,227.3
43,569.2
9,402.3
2.6
3,434.5
3,493.0
111.4
2,586.2
-47.1
819.4
1,719.7
76.9
1,796.6
297.5
1,843.7
76.3

FY16E
41,854.5
-21.0
23,437.0
1,588.3
3,714.7
7,311.6
36,051.6
5,802.9
-38.3
3,337.1
3,382.0
117.4
-798.8
-1,231.3
-563.0
-1,467.0
127.3
-1,339.7
PL
-108.4
-4.5

FY17E
54,235.5
29.6
29,316.6
2,054.9
5,117.1
8,022.6
44,511.3
9,724.2
67.6
4,049.9
3,651.3
140.0
2,163.0
0.0
648.9
1,514.1
28.6
1,542.8
-215.2
1,542.8
63.8

Cash flow statement

(Year-end March)
Profit after Tax
Add: Depreciation
(Inc)/dec in Current Asset
Inc/(dec) in CL&Provisions
Others
CF from operating activities
(Inc)/dec in Investments
(Inc)/dec in Fixed Assets
Others
CF from investing activities
Issue/(Buy back) of Equity
Inc/(dec) in loan funds
Dividend paid & dividend tax
Inc/(dec) in Sec. premium
Others
CF from financing activities
Net Cash flow
Opening Cash
Closing Cash

(| crore)
FY14
451.9
3,182.6
-2,901.2
-2,517.7
1,073.3
-711.0
-74.8
-7,920.7
-79.1
-8,074.6
0.4
7,496.0
-339.0
667.9
-30.2
7,795.2
-990.4
1,653.4
663.0

FY15
1,796.6
3,434.5
-2,831.3
6,367.0
766.0
9,532.8
63.5
-7,406.8
-311.9
-7,655.1
0.0
122.8
-339.0
-341.8
-69.4
-627.4
1,250.3
663.0
1,913.2

FY16E
-1,339.7
3,337.1
634.9
-5,343.4
0.0
-2,711.1
-50.0
-5,200.0
50.0
-5,200.0
-0.4
7,100.0
-254.1
341.8
0.0
7,187.2
-723.9
1,913.2
1,189.3

FY17E
1,542.8
4,049.9
-2,638.5
5,427.3
0.0
8,381.5
-50.0
-3,800.0
50.0
-3,800.0
0.0
-2,800.0
-367.3
0.0
0.0
-3,167.3
1,414.2
1,189.3
2,603.5

FY14

FY15

FY16E

FY17E

89.6
150.4
907.6
11.0
27.4

76.3
216.4
953.8
11.0
79.2

-4.5
82.6
901.9
8.0
49.2

63.8
231.4
950.6
12.0
107.7

17.9
5.9
0.9
98
16
123

17.7
4.9
3.4
135
17
163

13.9
-1.9
-3.2
135
17
160

17.9
4.0
2.8
142
17
160

9.9
10.6
10.7

8.0
10.3
10.7

-0.5
3.9
3.9

6.7
9.2
9.5

11.7
6.5
1.2
0.5
1.2

13.8
6.2
1.1
0.5
1.1

NM
11.4
1.6
0.6
1.2

16.5
6.4
1.1
0.5
1.1

3.8
1.6
1.2
0.7

3.7
1.5
1.0
0.6

7.2
1.9
1.3
0.8

4.0
1.7
1.1
0.7

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet

(| crore)

(Year-end March)
Liabilities
Share Capital
Reserve and Surplus
Total Shareholders funds
Total Debt
Deferred Tax Liability
Minority Interest / Others
Total Liabilities

FY14

FY15

FY16E

FY17E

1,067.2
20,871.1
21,938.3
34,761.9
2,123.4
1,136.6
59,960.1

1,067.2
21,986.9
23,054.1
34,884.6
3,154.7
778.9
61,872.3

1,066.8
20,734.8
21,801.6
41,984.6
3,154.7
828.9
67,769.8

1,066.8
21,910.3
22,977.0
39,184.6
3,154.7
878.9
66,195.3

Assets
Gross Block
Less: Acc Depreciation
Net Block
Capital WIP
Total Fixed Assets
Investments
Inventory
Debtors
Loans and Advances
Other Current Assets
Cash
Total Current Assets
Current Liabilities
Provisions
Total Current Liabilities
Net Current Assets
Others Assets
Application of Funds

65,710.4
21,224.5
44,485.9
10,398.0
54,883.9
662.7
8,155.1
2,292.4
9,403.4
17.5
663.0
20,531.5
17,317.4
362.5
17,679.9
2,851.6
1,561.9
59,960.1

74,810.4
24,659.0
50,151.5
8,704.7
58,856.2
599.3
11,009.0
2,499.8
8,922.9
268.2
1,913.2
24,613.1
23,690.6
356.3
24,046.9
566.2
1,850.6
61,872.3

84,010.4
27,996.1
56,014.4
4,704.7
60,719.1
649.3
8,668.5
1,949.4
11,178.9
268.2
1,189.3
23,254.2
18,347.2
356.3
18,703.4
4,550.8
1,850.6
67,769.8

91,810.4
32,046.0
59,764.4
704.7
60,469.2
699.3
11,405.4
2,526.0
10,528.9
243.2
2,603.5
27,306.9
23,774.5
356.3
24,130.7
3,176.2
1,850.6
66,195.3

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Key ratios
(Year-end March)
Per share data (|)
Adj EPS
Cash EPS
BV
DPS
Cash Per Share
Operating Ratios (%)
EBITDA Margin
PBT / Total Operating income
PAT Margin
Inventory days
Debtor days
Creditor days
Return Ratios (%)
Adj RoE
Adj RoCE
RoIC
Valuation Ratios (x)
P/E
EV / EBITDA
EV / Net Sales
Market Cap / Sales
Price to Book Value
Solvency Ratios
Debt/EBITDA
Debt / Equity
Current Ratio
Quick Ratio

Source: Company, ICICIdirect.com Research

Page 8

ICICIdirect.com coverage universe (Metals & Mining)

CMP
Company
Hindalco Industries

(|)

M Cap
TP (|) Rating

EPS (|)

(| Cr)

FY15

FY16E

P/E (x)
FY17E

EV/EBITDA (x)

FY15 FY16E FY17E

ROCE(%)

FY15 FY16E FY17E

ROE(%)

FY15 FY16E FY17E FY15 FY16E FY17E

71

75

Hold

14682

13.5

3.5

9.0

6.0

23.1

8.9

8.0

9.5

7.1

5.0

3.4

5.3

2.2

1.9

4.6

160

160

Buy

67621

19.4

18.0

16.0

7.3

7.9

8.8

4.0

3.6

3.8

20.9

17.2

14.7

18.9

15.9

13.1

1050

900

Sell

21755

76.3

-4.5

63.8

13.8

NM

16.5

6.2

11.4

6.4

10.3

3.9

9.2

8.0

-0.5

6.7

80

100

Hold

31859

16.2

10.3

11.0

6.1

9.5

8.9

2.6

4.7

5.4

23.6

13.3

13.8

19.9

12.1

12.3

SAIL

43

40

Sell

17637

5.1

-4.9

2.8

9.9

NA

17.7

10.4 106.4

8.1

4.0

-2.3

4.3

4.9

-4.7

2.8

Vedanta

72

75

Hold

21348

19.8

2.3

7.1

3.6

31.0

10.1

4.1

6.2

5.3

11.3

5.7

7.1

10.9

1.3

3.9

249

200

Hold

24217

NM

4.4

19.7

NM

60.8

13.7

7.8

9.4

6.8

5.8

4.0

6.4

0.0

1.2

5.2

Hindustan Zinc
JSW Steel
NMDC

Tata Steel

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 9

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research

Page 10

Disclaimer
ANALYST CERTIFICATION

We /I, Dewang Sanghavi, MBA (FIN) research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views
about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking
and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is Indias largest private sector bank and
has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (associates), the details in respect of
which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current.
Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended
temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this
company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment
in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned
in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation
or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any
material conflict of interest at the time of publication of this report.
It is confirmed that Dewang Sanghavi, MBA (FIN) research analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the
publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.
It is confirmed that Dewang Sanghavi, MBA (FIN) research analysts do not serve as an officer, director or employee of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.

ICICI Securities Ltd | Retail Equity Research

Page 11