JSW Steel – As the pricing takes into account most of the positives, upside potential for JSW Steel stock may be slim.
JSW Steel Ltd’s March quarter results beat street expectations in terms of Ebitda. This was due to higher volume, lower raw material cost and lower power and fuel (P&F) cost. Analysts said Indian companies also pleasantly surprised them. 15% increase in volumes, decline in net debt due to release of working capital and EBITDA per tonne for December quarter at Rs. 8,141 to Rs 10,998, he pointed out. However, the stock is very valuable, so it doesn’t have much room to grow. After JSW Steel reported its quarterly earnings, some analysts kept a “reduce” rating on the stock.
Nuama Institutional Equities, lower volumes and prices and marginal increase in coking coal costs will impact the June quarter. For now, the brokerage raised its EBITDA forecasts for FY24 and FY25 by 2% to 2.3%, taking into account higher prices and volumes. Raised its target price to Rs 731 from Rs 668, extending FY25E, valuing the stock at 7.5 times EV/Ebitda. In this, it is said to be ‘lowering’ due to high ratings.
JSW Steel’s overall net profit rose 11.9% to Rs 3,741 crore on Friday from the same quarter last year. It was Rs 3,343 crore in the same quarter last year. Net sales for the quarter increased by 0.14 per cent year-on-year to Rs 46,962 crore from Rs 46,895 crore.
JSW Steel reported its crude steel production in the quarter at 6.58 million tonnes, an all-time high. This is 6.8% higher than the previous quarter. This was mainly due to the ramp-up of the 5 MTPA Dovali Phase II, which was utilized at 91% of its capacity. BPSL increased production from 2.75 MTPA to 3.5 MTPA. JSW Steel reported an all-time high of 6.53 million tonnes of salable steel during the quarter.
Motilal Oswal Securities said the current valuation of 6 times FY24E EV/Ebitda and 2 times FY24E price to book value are absolutely positive factors. It maintained its “neutral” rating on the stock and set a new target price of Rs 700. Nomura India has revised its target for the stock to Rs 605, as it believes falling steel prices will wipe out its gains. At the cost of coking coal.
“We expect volumes to be supported by domestic demand and increase in VAP share. Coking coal prices have come down and Motilal Oswal Securities said it will start paying in June 2023. The brokerage believes more business will come after the commissioning of the Vijayanagar plant and the second phase capacity addition of the BPSL plant. Margins are expected to be supported by the opening of a CAL line at Vasind, a plate plant at Anjar and a tinplate line at Vijayanagar.
According to the report, “We have increased our FY14 Revenue/EBITDA/Adjusted PAT estimate by 3%/4% on the back of increased demand, increase in VAP and expected cost reductions in the coming months. ,
ICICI Securities believes that the risk and return appetite for JSW Steel is almost identical. On the one hand, the company’s volume growth in FY24E and FY25E will be higher than its peers. On the other hand, the company’s debt is still high and unlikely to decrease with its capital plans.
“The share price is back on track and is now trading close to its 10-year historical average EV/EBITDA. At this point, we can start talking about numbers for FY25E and move to FY25E valuations. We have a new target price of Rs 675, up from Rs 550. 6.2x FY25E The multiple of EBITDA remains the same.We change the stock from “Sell” to “Hold”.