1 August QFY18 Results Update Sector: Metals JSW Steel. Estimate change TP change Rating change. Quarterly Performance (Consolidated) INR m

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1 BSE SENSEX S&P CNX 32,575 10,115 Motilal Oswal values your support in the Asiamoney Brokers Poll 2017 for India Research, Sales and Trading team. We request your ballot. Bloomberg JSTL IN Equity Shares (m) 2,417 M.Cap.(INRb)/(USDb) / Week Range (INR) 225 / 151 1, 6, 12 Rel. Per (%) 4/-3/16 Avg Val, INRm 1162 Free float (%) 58.4 Financials & Valuations (INR b) Y/E Mar E 2019E Net Sales EBITDA PAT EPS (INR) Gr. (%) nm BV/Sh (INR) RoE (%) RoCE (%) P/E (x) P/BV (x) Estimate change TP change Rating change 1 August 2017 Results Update Sector: Metals JSW Steel CMP: INR223 TP: INR297(+33%) Buy Subsidiaries led the beat in EBITDA Margin outlook positive; upgrading estimates and TP JSW Steel s (JSTL) cons. EBITDA declined 17% QoQ to INR26.2b (8% beat) due to seasonal decline in volumes and lower steel prices. Standalone EBITDA at INR22b was in-line, while the positive surprise came from subsidiaries. S/A sales increased 5% YoY (-11% QoQ) to 3.51mt. Consolidated sales were lower at 3.39mt due to an increase in inventories at subsidiary level. The share of exports declined 13pp QoQ to 23% due to weakness in the international market. S/A EBITDA/t was down 17% QoQ at INR6,262 on lower steel prices, increase in iron ore cost and only USD18/t benefit in coking coal cost. Subsidiaries reported EBITDA of INR4.2b v/s estimate of INR1.7b. JSW Coated benefited from conversion arrangement with Uttam. Conversion volumes will inch up further and drive EBITDA. US Plate mill has turned around, with CU increasing 9pp QoQ to 28%, which contributed USD5.1m to EBITDA. It is expected to be sustainable. Other subsidiaries (Salav, Industrial gases, etc.) posted strong EBITDA of INR1.8b. We believe that at least 30-40% of this is sustainable. Net debt increased by INR17b QoQ on working capital increase. Margin outlook positive; subsidiaries driving upgrade; Maintain Buy Global steel market and prices are trading strong, driven by positive surprise in demand from China. Indian steel demand too is inching up and driving domestic steel prices. We expect margins to expand for JSTL on declining input cost and stronger steel prices. We are upgrading cons. FY19E EBITDA by 4% to INR152b on significant improvement in the operating performance of subsidiaries. The SOTP too is increased by 5% to INR297/share. Maintain Buy. Quarterly Performance (Consolidated) INR m Y/E March FY17 FY18 FY17 FY18E FY18` vs Est 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE (%) Net Sales 117, , , , , , , , , , ,271 7 Change (YoY %) EBITDA 32,694 29,586 28,669 31,649 26,170 31,351 41,657 41, , ,474 24,145 8 Change (YoY %) Interest 9,358 9,646 9,201 9,476 9,450 9,954 9,862 9,771 37,681 39,037 10,046-6 Depreciation 8,315 8,915 9,146 8,779 8,190 8,272 8,355 8,513 35,154 33,329 9, Other Income ,521 2, PBT (before EO Item) 15,356 11,320 10,655 13,953 8,940 13,972 24,292 23,869 51,284 71,073 5, EO Items PBT (after EO Item) 15,356 11,320 10,655 13,953 8,940 13,972 24,292 23,869 51,284 71,073 5, Total Tax 4,507 4,734 3,511 3,992 2,840 3,810 6,831 6,720 16,743 20,200 1,690 % Tax Reported PAT 10,848 6,587 7,145 9,961 6,100 10,162 17,461 17,150 34,541 50,873 3, MI (Profit)/Loss Share of P/(L) of Ass ,193 2, Pref. Dividend Adjusted PAT 11,090 7,265 7,300 10,143 6,240 10,840 18,139 17,828 35,798 53,047 4, Change (YoY %) -1, , Sanjay Jain (SanjayJain@MotilalOswal.com); Dhruv Muchhal (Dhruv.Muchhal@MotilalOswal.com); Investors are advised to refer through important disclosures made at the last page of the Research Report. Motilal Oswal research is available on Bloomberg, Thomson Reuters, Factset and S&P Capital.

2 Exhibit 1: Standalone quarterly performance INR million Y/E March FY17 FY18 FY17 FY18E FY18 vs Est (Standalone) 1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QE 1QE (%) Production ('000 tons) 3,870 3,980 3,860 4,100 3,910 3,906 4,427 4,427 14,780 15,760 3,910 0 Change (YoY %) Sales ('000 tons) 3,340 3,840 3,640 3,960 3,510 3,750 4,250 4,250 14,780 15,760 3,500 0 Change (YoY %) Realization (INR/T) 32,691 31,869 36,688 39,847 39,422 36,500 36,500 36,500 35,379 37,151 37, Change (QoQ, INR) 3, ,819 3, , ,000 1,772-2,347 Net Sales 109, , , , , , , , , , ,250 5 EBITDA 30,982 27,175 28,090 30,041 21,980 28,601 38,837 38, , ,824 22,446-2 EBITDA (INR/T) 9,276 7,077 7,717 7,586 6,262 7,627 9,138 9,037 7,868 8,111 6,413-2 EBITDA (USD/T) Interest 8,631 9,155 9,009 9,632 9,070 9,154 9,062 8,971 36,428 36,257 9,246-2 Depreciation 7,436 7,881 7,939 7,847 7,320 7,393 7,467 7,616 31,102 29,797 8, Other Income ,554 2, PBT (before EO Item) 15,351 10,664 11,919 13,379 6,070 12,601 22,859 22,376 51,313 63,905 5, EO Items PBT (after EO Item) 15,351 10,664 11,919 13,379 6,070 12,601 22,859 22,376 51,313 63,905 5, Total Tax 4,527 3,949 3,727 3,345 1,880 3,528 6,401 6,265 15,547 18,074 1, % Tax Reported PAT 10,824 6,715 8,192 10,034 4,190 9,073 16,459 16,110 35,765 45,832 3,872 8 Pref. Dividend 0 Adjusted PAT 10,824 6,715 8,192 10,034 4,190 9,073 16,459 16,110 35,765 45,832 3,872 8 Change (YoY %) Exhibit 2: Subsidiaries financials INR million Y/E March FY17 FY18 FY17 FY18E FY17` vs Est 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q (%) Net Sales 7,891 9,903 6,582 8,768 8,620 7,533 8,713 9,894 33,145 34,759 6, EBITDA 1,712 2, ,608 4,190 2,750 2,820 2,890 6,310 12,650 1, JSW coated 1,570 1,420 1,505 1,610 2,050 1,750 1,820 1,890 6,105 7,510 1, US Mills ,338 0 Others , , PAT ,050 1,768 1,681 1, , Exhibit 3: Standalone quarterly volumes and EBITDA Volumes (Kt) EBITDA per ton (INR) 9,276 8,545 8,534 6,988 5,469 4,838 4,986 5,404 3,443 7,077 7,717 7,586 6,262 2,880 3,070 3,030 3,060 3,110 3,140 2,550 3,283 3,340 3,840 3,640 3,960 3,510 1 August

3 Exhibit 4: JSW Coated quarterly performance Volumes (Kt) EBITDA (INR/T) 4,271 3,925 3,227 3,500 3,659 2,634 2,775 2,757 2,375 2,262 1,757 1,487 1, Exhibit 5: EBITDA contribution from subsidiaries INR m JSW Coated Others , , ,110 1, ,570 1,420 1,505 1,610 2, ,140 2QFY14 3QFY14 4QFY14 Exhibit 6: Share of exports and retail sales in volumes Exhibit 7: Share of value-add & special product sales in vols. 27% 25% 29% 24% 14% Exports 10% 12% 40% Retail 38% 19% 32% 26% 36% 21% 32% 36% 28% 23% 29% Value add & special product mix (%) 29% 33% 35% 34% 35% 34% 36% 36% 35% 37% 38% 34% 33% Exhibit 8: Target price derivation Year E 2019E 2020E A. S/A volumes B. EBITDA per ton 4,736 7,868 8,111 8,729 8,500 C. S/A EBITDA (AxB) 57, , , , ,250 D. Sub. EBITDA 3,505 6,310 12,650 12,050 12,653 E. Cons. EBITDA (C+D) 60, , , , ,903 F. Target EV/EBITDA (x) G. Target EV (FxG) 425, , ,317 1,061,997 1,070,318 less: Net Debt (Rs m) 505, , , , ,226 add: CWIP 69,040 43,631 83, , ,631 Equity value 564, , ,723 No. of shares 2,417 2,417 2,417 Equity value /sh August

4 Financials and Valuations Income Statement (INR Million) Y/E Mar E 2019E 2020E Net Sales 382, , , , , , , ,480 Change (%) EBITDA 65,039 91,655 94,023 60, , , , ,903 EBITDA Margin (%) Depreciation 22,375 31,826 34,345 31,879 35,154 33,329 34,911 35,959 EBIT 42,664 59,829 59,678 28,851 87, , , ,944 Interest 19,675 30,479 34,930 33,027 37,681 39,037 37,327 38,447 Other Income ,114 1,682 1,521 2,965 3,485 3,520 Extraordinary items -4,302-17, , PBT 19,385 13,081 25,391-23,748 51,284 71,073 82,961 82,018 Tax 8,453 9,201 8,194-15,241 16,743 20,200 23,434 27,066 Tax Rate (%) Min. Int. & Assoc. Share Reported PAT 9,352 3,232 16,191-9,599 35,670 53,750 63,177 58,601 Adjusted PAT 11,091 9,322 18, ,798 53,047 62,239 57,664 Change (%) , Balance Sheet (INR Million) Y/E Mar E 2019E 2020E Share Capital 2,231 2,417 2,417 2,417 3,013 3,013 3,013 3,013 Reserves 168, , , , , , , ,664 Net Worth 170, , , , , , , ,677 Debt 293, , , , , , , ,507 Deferred Tax 32,720 21,234 28,894 39,123 30,736 36,721 43,563 54,225 Total Capital Employed 499, , , , , , , ,663 Gross Fixed Assets 458, , , , , , , ,977 Less: Acc Depreciation 111, , , , , , , ,592 Net Fixed Assets 347, , , , , , , ,385 Capital WIP 58,979 93,998 82,653 69,040 43,631 83, , ,631 Investments 16,064 5,947 5,990 6,184 10,670 10,670 10,670 10,670 Current Assets 152, , , , , , , ,030 Inventory 54,952 81, ,090 84, , , , ,133 Debtors 21,063 22,924 24,998 28,016 41,494 28,889 29,428 30,389 Cash & Bank 17,969 7,310 19,136 7,340 17,852 31,451 46,965 61,281 Loans & Adv, Others 58,933 94,209 91,910 88,337 74,226 74,226 74,226 74,226 Curr Liabs & Provns 75, , , ,610 92,145 94,669 95,525 97,052 Curr. Liabilities 30,858 44,501 39,560 44,051 43,358 45,882 46,739 48,266 Provisions 45,022 60,397 67,794 62,558 48,787 48,787 48,787 48,787 Net Current Assets 77, , , , , , , ,978 Total Assets 499, , , , , , , ,663 1 August

5 Financials and Valuations Ratios Y/E Mar E 2019E 2020E Basic (INR) EPS Cash EPS Book Value DPS Valuation(x) P/E Cash P/E Price / Book Value EV/Sales EV/EBITDA EV/ton 1,600 1,349 1,382 1,319 1,063 1, Dividend Yield (%) Profitability Ratios (%) RoE RoCE RoIC Turnover Ratios (%) Asset Turnover (x) Inventory (No. of Days) Debtors (No. of Days) Leverage Ratios (%) Net Debt/Equity (x) Cash Flow Statement (INR Million) Y/E Mar E 2019E 2020E Adjusted EBITDA 65,039 91,655 94,023 60, , , , ,903 Non cash opr. exp (inc) -7,379-26,487-5,522 2, (Inc)/Dec in Wkg. Cap. 5,888-35,195-11,748 6,189-44,087 10,126-1,904-3,393 Tax Paid -5,105-4,038-7,728-2,055-10,257-14,215-16,592-16,404 Other operating activities CF from Op. Activity 58,442 25,935 69,025 67,035 67, , , ,638 (Inc)/Dec in FA & CWIP -56,301-57,629-67,206-51,787-24,993-80,000-80,000-80,000 Free cash flows 2,142-31,693 1,819 15,249 42,792 56,034 52,749 52,638 (Pur)/Sale of Invt , Others -9,547-12,146 10, ,521 2,965 3,485 3,520 CF from Inv. Activity -65,074-69,599-55,509-51,079-6,882-77,035-76,515-76,480 Inc/(Dec) in Net Worth Inc / (Dec) in Debt 9,546 60,290 27,373 3, Interest Paid -15,186-24,131-25,626-27,997-37,681-39,037-37,327-38,447 Divd Paid (incl Tax) & Others -2,269-3,155-3,437-3,536-3,111-6,363-3,394-3,394 CF from Fin. Activity -7,909 33,005-1,691-27,752-40,792-45,400-40,721-41,840 Inc/(Dec) in Cash -14,541-10,659 11,826-11,796 20,111 13,599 15,514 14,318 Add: Opening Balance 32,510 17,969 7,310 19,136 7,340 17,852 31,451 46,965 Closing Balance 17,969 7,310 19,136 7,340 27,450 31,451 46,965 61,282 1 August

6 Corporate profile Company description JSW Steel (JSTL) demonstrated excellent project execution skills over the past decade, growing its annual capacity 6x to 10m tons through brownfield expansions at Vijaynagar. With the acquisition of Ispat Industries and Salem Steel, it controls annual capacity of 14.3m tons. Its main production facilities are located in proximity to rich iron ore reserves in Karnataka. It has investments in iron ore and coal mining in Americas. Its other overseas investments include plate and pipe mill operations and coal mines in the US. Exhibit 1: Sensex rebased Source: MOSL/Bloomberg Exhibit 2: Shareholding pattern (%) Jun-17 Mar-17 Jun-16 Promoter DII FII Others Note: FII Includes depository receipts Source: Capitaline Exhibit 3: Top holders Holder Name % Holding JFE STEEL INTERNATIONAL EUROPE B.V GAGANDEEP CREDIT CAPITAL PVT LTD 1.9 LOTUS GLOBAL INVESTMENTS LTD 1.7 APMS INVESTMENT FUND LTD 1.5 THE INDIAMAN FUND (MAURITIUS) LIMITED. 1.3 Source: Capitaline Exhibit 4: Top management Name Designation Sajjan Jindal Chairman & Managing Director Savitri Devi Jindal Chairman Emeritus Vinod Nowal Deputy Managing Director Seshagiri Rao Jt. Managing Dir. & Group CFO Lancy Varghese Company Secretary Exhibit 5: Directors Name Jayant Acharya Kannan Vijayaraghavan Punita Kumar Sinha Vijay Kelkar NAVEEN RAJ SINGH Name H Khaitan Malay Mukherjee Seturaman Mahalingam Hiromu Oka Source: Capitaline *Independent Exhibit 6: Auditors Name Deloitte Haskins & Sells LLP S R Bhargave & Co Type Statutory Cost Auditor Source: Capitaline Exhibit 7: MOSL forecast v/s consensus EPS MOSL Consensus (INR) forecast forecast Variation (%) FY FY FY Source: Bloomberg 1 August

7 N O T E S 1 August

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