>JSW STEEL (RELIANCE MONEY)

Price target achieved
JSW Steel has appreciated by more than 18%, since our last recommendation dated May 11, 2009. We had given a buy call with a price target of Rs 485 on the spectacular guidance given by the management for FY2010E and FY2011E. The management had guided for 70% rise in the production for FY2010E owing to the successful operations expected from the green field facility recently commissioned.

Indian Steel industry is exhibiting resilience:
Indian Steel industry is not showing the panicky conditions exhibited by the global steel majors. The steel prices throughout the country are stable and above the international prices which in turns are exhibiting some strength. The Indian domestic Steel prices have been steadfast. The Steel demand is expected to remain robust despite the recessionary noises through out the globe. According to World Steel Association India's apparent steel demand is forecasted to reach 53.5 mmT in CY09, a 1.7% rise over that of CY08 and is expected to reach 58 mmT in 2010, an increase of 8% YoY.

Steel prices are expected to be stable and rising:
The demand for Indian Steel Industry is expected to steady. Although, the capacity expansion projects of domestic steel majors are on track, the green field plans made by foreign Steel behemoths like POSCO and Arcellor Mittal have been deferred. The mismatch between expected demand and supply is expected to keep the prices steady and rising.

Valuation:
At CMP of Rs 511, the stock quotes at an EV/EBIDTA of 1.7x FY2011E earnings. Currently, we feel that the pricing of the stock is stretched. We advise the clients to book profits at this price and re-enter at lower levels although we are positive on the future prospects of the company.

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