Nuvama Institutional Equities said that lower volume and prices and a small rise in the cost of coking coal are likely to have an effect on the June quarter. For now, the brokerage has raised its expectations for Ebitda for FY24 and FY25 by 2% to 2.3%.
The March quarter results of JSW Steel Ltd. beat Street expectations in terms of Ebitda. This was due to higher volume, lower raw material costs, and lower power and fuel (P&F) costs. Analysts said that the Indian companies also surprised them in a good way. They pointed to a 15% increase in volumes, a drop in net debt due to the release of working capital, and an increase in Ebitda per tonne from Rs 8,141 in the December quarter to Rs 10,998. Still, the stock is worth a lot, so there isn’t much room for it to go up. After JSW Steel reported its quarterly earnings, some analysts kept their “Reduce” rating on the stock.
Nuvama Institutional Equities said that lower volume and prices and a small rise in the cost of coking coal are likely to have an effect on the June quarter. For now, the brokerage has increased its Ebitda predictions for FY24 and FY25 by 2% to 2.3% to account for higher prices and volume. It raised its goal price from Rs 668 to Rs 731, pushed it out to FY25E, and put a value of 7.5 times EV/Ebitda on the stock. “Because the price is high, we keep ‘Reduce,'” it said.
JSW Steel’s total net profit rose by 11.9% from the same quarter last year to Rs 3,741 crore on Friday. In the same quarter last year, it was Rs 3,343 crore. Net sales for the quarter went up by 0.14 percent year over year, from Rs 46,895 crore to Rs 46,962 crore.
JSW Steel said that its crude steel production for the quarter was 6.58 million tonnes, which was the most it had ever made. This was a 6.8% increase from the previous quarter. This was mostly because of the ramp-up of the 5 mtpa Dovli Phase II, which used 91% of its capacity. BPSL also went from producing 2.75 mtpa to producing 3.5 mtpa. JSW Steel also said that the amount of saleable steel sold in the quarter was the most ever, at 6.53 million tonnes.
Motilal Oswal Securities said that the present valuations of 6 times FY24E EV/Ebitda and 2 times FY24E price to book value fully price in the positive factors. It kept its “Neutral” rating on the stock and set a new target price of Rs 700. Nomura India has changed its goal for the stock to Rs 605, because it thinks that a drop in steel prices will cancel out the benefits of a drop in the cost of coking coal.
“We expect volumes to benefit from a rise in domestic demand and a bigger share of VAP. The price of coking coal has gone down, and Motilal Oswal Securities said that it will start to pay off in June of 2023. This brokerage thinks that more business will come in after the Vijayanagar plant starts up and the BPSL plant’s Phase II capacity increase. The opening of a CAL line at Vasind, a plate mill at Anjar, and a tinplate line at Vijayanagar is anticipated to help the margin.
“Because demand is going up, the share of VAP is going up, and we expect cost cuts in the next few months, we have slightly raised our revenue, Ebitda, and adjusted PAT expectations for FY24 by 3%, 4%, and 6%, respectively,” it said.
ICICI Securities thinks that the risk and return for JSW Steel are about the same. On the one hand, the company’s volume growth in FY24E and FY25E is likely to stay ahead of its peers. On the other hand, the company’s debt is still high and is not likely to go down because of its capital plans.
“The stock price has gone back up and is now selling close to its 10-year average EV/EBITDA. At this point, we start to talk about numbers for FY25E and move on to FY25E values. Our new goal price is Rs 675, up from Rs 550. The multiple of 6.2x FY25E EBITDA remains the same. We change the stock from “SELL” to “HOLD”),” it said.
