HDFC Sec - JSW Steel

HDFC Securities believes that JSW Steel is set to outperform its peers as it can weather any downturn in steel prices due to the strong volume growth. Broking house, has given target price of Rs 670 over the next 9-12 months.

HDFC Securities report on JSW Steel:

JSW Steel is set to outperform its peers as it can weather any downturn in steel prices due to the strong volume growth. It is expanding capacity from 3.8 million tonnes in FY07 to 6.8mn tonne in FY10. It will further enhance it to 10mn tonnes in FY12. JSW currently trades at 5.7x and 5.1x its FY08E and FY09E EPS of Rs97.8 per share and Rs108.1 per share, which is at a discount to its peers. SAIL and Tata Steel trade at 7.3x and 6.9x its FY08E EPS of Rs17.6 per share and 87.7 per share. We, therefore, have a target price of Rs 670 over the next 9-12 months.

Other Key Highlights

JSW plans to issue an FCCB of an aggregate value not exceeding USD 325 million, which is being issued at a conversion rate of Rs 953.4 per share for a tenure of 5 years and 1 day. The yield to maturity stands at 7.25% per annum calculated on a semi annual basis, if not converted into shares during the tenure of the bond. The issue is likely to be closed on June 27, 2007 and would be listed on the Singapore Stock Exchange.