JSW Steel hits new 1-year low
JSW Steel plunged to a new yearly low with double the recent average volumes as funds worried about earnings impact of iron ore shortage sold off.
By ET Bureau | Updated:
MUMBAI: JSW Steel plunged to a new yearly low with double the recent average volumes as funds worried about earnings impact of iron ore shortage sold off, fearing it may be months before operations become normal.
It fell to 566 with volumes higher than its two-week average as the company plans to shut its Karnataka plant due to acute iron-ore shortage. The cut production estimates by 70 % in the Vijayanagar plant in Karnataka after a SC order restricted mining in the state.
"We assume 7.4 MT crude steel output for FY12, about 10-12% lower than company guidance, but if this 30% capacity utilisation persists for some time, there may be some downside," said Vipul Prasad, research analyst, Morgan Stanley.
"We may have to shut entirely (Vijayanagar plant) and there is a good possibility of closure if the situation does not improve," JSW's VCand MD Sajjan Jindal said.
The stock fell as much as 7% before closing marginally higher at 570. Others, including Tata Steel, had a rub off effect and slid 3% to 427.45. As far as Tata Steel was concerned analysts said it may not be hurt since it has its own ines unlike JSW.
Analysts say if JSW Steel runs at 30%, India's steel output would fall nearly 7% on a daily basis - aiding domestic steel prices. Also, with India moving closer to a net steel exporter status, thanks to weak steel demand growth and rising risks to global growth as well, margins of converters like JSW are vulnerable.
"We cut FY12-13 EPS by 22-30% factoring in a 9% lower steel volumes in FY12 and 8-10% lower EBITDA/t in FY12-13 due to higher iron ore costs," said Abhijeet Naik, Research Analyst, CLSA. JSW's capex over FY12-13 remains high at $3 billion, resulting in negative future cash flows and rising debt.
It fell to 566 with volumes higher than its two-week average as the company plans to shut its Karnataka plant due to acute iron-ore shortage. The cut production estimates by 70 % in the Vijayanagar plant in Karnataka after a SC order restricted mining in the state.
"We assume 7.4 MT crude steel output for FY12, about 10-12% lower than company guidance, but if this 30% capacity utilisation persists for some time, there may be some downside," said Vipul Prasad, research analyst, Morgan Stanley.
"We may have to shut entirely (Vijayanagar plant) and there is a good possibility of closure if the situation does not improve," JSW's VCand MD Sajjan Jindal said.
The stock fell as much as 7% before closing marginally higher at 570. Others, including Tata Steel, had a rub off effect and slid 3% to 427.45. As far as Tata Steel was concerned analysts said it may not be hurt since it has its own ines unlike JSW.
Analysts say if JSW Steel runs at 30%, India's steel output would fall nearly 7% on a daily basis - aiding domestic steel prices. Also, with India moving closer to a net steel exporter status, thanks to weak steel demand growth and rising risks to global growth as well, margins of converters like JSW are vulnerable.
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"We cut FY12-13 EPS by 22-30% factoring in a 9% lower steel volumes in FY12 and 8-10% lower EBITDA/t in FY12-13 due to higher iron ore costs," said Abhijeet Naik, Research Analyst, CLSA. JSW's capex over FY12-13 remains high at $3 billion, resulting in negative future cash flows and rising debt.
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