BSE Metal index slips 4% in the week

25 Sep 2009 , 07:06 PM

The Metals sector (down 4%): The top losers in the metals space were Lloyds Metals (down 6.3%), SAIL (down 4.9%), Adhunik Metaliks (down 4.3%) and Tata Steel (down 4.3%).

The top gainers were Tata Sponge (up 8.7%), JSW Steel (up 1.1%) and Sunflag Iron (up 0.8%).

Jindal Steel fell 4.7% during the week. According to a report released by IIFL during the week, “JSPL’s annual report outlines the company’s long-term goal of growing its steel capacity to 30mtpa (from the current 3mtpa) and expanding its power generation portfolio to 12GW (from 1.3GW as at end- FY09) in a decade or so. The management seems to be getting more aggressive on overseas expansion, as seen from its acquisition of coal blocks and E&P assets during FY09. It is also contemplating raising up to US$750m through FCCB/GDR route, perhaps for M&A. A low D/E (0.9x) and outstanding debtors of 18 days (despite merchant sale of power) are key highlights of the balance sheet. Netting out valuations of the steel business, JSPL’s power business is trading at 15x FY11ii PAT– adequately reflecting near-term growth prospects. Nonetheless, a unique revenue model (vertical integration + opportunistic sale of power) and visibility on expansion make JSPL a good play on peak power deficit in the long term. Separate listing of JPL would be the key trigger for the stock to continue its outperformance relative to its peers. We maintain ADD”.