>Sail(JP Morgan)

Sharply lower earnings likely over the next two to three quarters, but
building in gradual recovery from H2FY10E: We expect sharp earnings
erosion over the next two to three quarters, driven by lower volumes and
higher coking coal costs. We expect H2FY09E earnings decline of 79% y/y.
However, we expect earnings to improve from June-09 as lower coking coal
kicks in. We cut our EPS estimates sharply over FY09E-11E (13-43%).
• Domestic demand recovery critical: Given the dependence on imported
coking coal, we believe most of India's steel companies are less competitive
in the export market compared to CIS/Chinese steel exports, and therefore
we believe demand recovery in the domestic market is critical to earnings
recovery in H2FY10E. However, we project extremely weak steel demand
over the next few months, and we cut our India steel demand growth
estimates to 4.5% for FY10E.

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