India’s largest steelmaker JSW Steel (part of the $13 bn JSW group) has the highest market capitalization among its steely peers. At a total production capacity of 18 MTPA, the company has enhanced its capacity 9 times over the past 15 years and is marching on to achieve 40 MTPA in the next 7 years.
– Regarded as the most efficient steel producer in the country with an inherent ability to expand capacities at lower costs.
– JSW Steel has the highest utilization rate of 91%, the best in the industry.
– PAT was up 152% or 2.5 times at Rs. 2089 cr in Q2 FY19, highest among its peers, compared to Rs. 829 cr same period previous year.
– JSW Steel is undertaking a Rs. 40,000 crore expansion drive to enhance its total manufacturing capacity to 24.7 MTPA by March 2020.
– JSW Steel has CAGR of 39% and 13% for PAT and Revenue respectively over the past five years.
Management Commentary- JSW STEEL : We have not missed opportunities to acquire assets under IBC; Seshagiri Rao, Joint MD
- India had 91 million tonnes of steel demand last year and it is expected to be 230 million tonnes in the next 10-12years. It’s a big growth opportunity in India.
- Company is expanding capacities by 40% from 18 mtpa to 25 mtpa. Have also done some acquisition in Europe. In the long run, plan to have 45 mtpa of capacity by 2030 to maintain 15% market share.
- Planning to almost double Vijayanagar steel plant to 23 mtpa from 12 mtpa now. Also plan to double the Dolvi plant capacity to 12 mtpa. Monnet Ispat is 1.5 mtpa now with scope for further expansion. Company recently signed an MoU with Odisha government to set up a 12 mtpa greenfield plant for 35,000 crore.
- Think any competent player with technology coming into India will bring in healthy competition, which company welcomes. India is an open market and anybody can compete globally, steel is a globally traded commodity. Company is exporting and also facing import competition, so don’t think it (ArcelorMittal and other global players coming to India) will change the landscape and create any issues in India.
- Don’t think company has missed a better opportunity (under IBC)
First Among Equals: JSW Steel v/s Tata Steel
JSW Steel recently became second in command, pipping Tata Steel in 2014 and dislodged SAIL as the largest steel maker domestically in 2015. While Tata Steel was putting its house in order, JSW Steel was busy augmenting its technical capabilities and operational dexterity evident from its strong operational competence and higher utilization levels. From the year 2009, Tata Steel has posted negative PAT in five out of nine past financial years.
NCLT Bidding War: The Ongoing Battle
The Monnet Ispat acquisition through NCLT resolution has increased JSW Steel’s capacity to 19.6 MTPA annually. Not to be left behind, Tata Steel has taken Bhushan Steel under its fold enhancing its annual capacity to 18.6 MTPA. With both the combatants neck and neck, Bhushan Power and Steel producing 3 million tonnes annually holds the key for strong inorganic growth in a highly competitive industry. Fructification of this acquisition will realize Tata Steel’s long-lost dream whereas JSW Steel apart from its crown retention will fulfill its long-term strategy of achieving higher NSR
India has replaced Japan as the second largest steel producer in the world and with domestic steel demand doubling to 245 million tonnes in the next 10-12 years.
JSW STEEL has been on the radar from the lower levels in 2016 and has been update couple of times during the rally. The long term rally has been quite steady in nature and this is the first time, the stock has given a healthy correction. After quite a rally, the corrective move seems to have providing good opportunity for the long term up rise. Considering the advance, the correction has been towards the minimal retracement of 38.2% of the overall advance with momentum indicators easing towards long term support. At the current juncture, 38.2% coincides with Ichimoku cloud zone on weekly timeframe charts and the previous swing low. RSI declines towards 40 on the larger timeframe is considered as long term support and correction in completion. The scenario indicates that stock will undergo some consolidation and further resume its primary uptrend. Thus the room towards seems to be limited with supports intact at 290-300 zone and upside potential towards testing the peak zone.