Thread by @desiwallstreet

(1/n)
JSW Ispat Special Products Ltd (JSWISPL) - A Strong Rerating Candidate

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(2/n)
JSWISPL is engaged in manufacturing and marketing of sponge iron, steel & ferro alloys, billets & pellets
Co has upgraded its production process from commodity steel to special steel products catering to needs of seamless pipe industries, automobile & high-speed rail steel

(3/n)
In August 2018, a joint consortium of AION Investments Private II Ltd. (AION) & JSW Steel Limited acquired controlling stake in JSW Ispat Special Products Ltd

(4/n)
Huge Capacities
▪️0.95 MTPA Integrated operational steel plant at Raigarh
▪️0.3 MTPA Sponge iron capacity at Raipur
▪️0.25 MTPA Steel melting capacity at Raipur
▪️0.044 MTPA Ferro alloy capacity
▪️234 MW Captive power generation capacity

(5/n)
Leveraging synergies within JSW Steel
▪️JSW Steel enjoys RM security with 13 fully operational mines in Karnataka & Odisha
▪️These captive mines together provide aggregate iron ore reserves of 1.2 billion tonne
▪️Co acquires quality iron ore from mines located in Odisha

(6/n)

Currently in Ramp up stage
▪️JSWISPL is operating its pellet plant at 80-85% utilization in FY21 and its steel plant at 40% utilization. ▪️With better demand and improving RM availability utilization is expected to increase significantly.

(7/n)
▪️JSW guides for 0.6 MT production of steel in FY22E & 1 MT in FY23E.
▪️Utilization is expected to hit 90-100%

(8/n)
Focus on Cost Optimisation
▪️Co has entered into conversion agreements with coke manufacturers in Odisha that allows to acquire coking coal & convert it to coke instead of buying the entire finished product from the market.

(9/n)
Marketing synergies with JSW Steel
▪️JSW Steel to extend using its Neosteel brand. Additionally JSWSL’s manufacturing facilities are located in the Southern & Western parts of the country.

(10/n)
▪️JSW Ispat strategic presence in the Eastern part of the country will enable the JSW Steel Group to tap the markets in Central, Northern & Eastern parts of India.

(11/n)
Strong Demand & Higher Spreads
▪️Pellet demand remains extremely strong & spreads are much higher. Expect earnings to be even Stronger going ahead

(12/n)
FY23E to see Full Utilization & Peak Earnings
▪️With full capacity utilization JSW Ispat can report 1200 cr EBITDA in FY23E

(13/n)
▪️1,000 cr from its 1 MT Steel Capacity at (Steel margin assumption 10,000 EBITDA/Ton) & 200 cr EBITDA from its 1 MT Pellet which will be sold externally (Pellet Margin Assumption 2,000/Ton)
FY23 PAT estimated at 600cr

(14/n)
Trading extremely Cheap
▪️JSW Ispat quotes at 4x FY23E EV/EBITDA & P/E of 6.5x FY23E EPS, JSW Steel is currently quoting at 8x FY23E EV/EBITDA
▪️JSW group is the most efficient converter of steel globally, and may eventually merge JSW Ispat with itself

(15/n)
Tax Exemption to help save Cash flows
▪️Given that JSW Ispat is an NCLT case, it won’t have to pay tax for few years which will result in INR 150-200 crore savings which could be utilized to expand capacity

(16/n)
Good Interest in Recent OFS
▪️AOIN Group recently came up with an OFS to sell 10cr shares at a floor price of 27/Share, which got executed at 35/Share.
▪️A Multibagger in the Making