JSW Steel Q3 Results Review - Ebitda Broadly Inline; International Operations Show Recovery: Systematix

Systematix Report

JSW Steel Ltd.'s Q3 FY24 cons. adjusted. Ebitda of Rs 71.8 billion (-9.6%/-9.0% YoY/QoQ) was 2.3% above our estimate majorly due to resilient performance at Indian operations and steady recovery at international operations. Cons. revenue of Rs 419.4bn (+7.2%/-5.9% YoY/QoQ) was 10.8% above our estimate.

Standalone India operations reported sales volume of 6.06mt, a change of plus 23%/-2% YoY/QoQ, partially offsetting the impact of lower steel realisations which came in at Rs 54,967/t (-12%/+1% YoY/QoQ). Standalone Ebitda Rs 57.7 billion (-7%/-16% YoY/QoQ) was 10% above our estimate.

Standalone raw material costs increased by 13%/18% YoY/QoQ due to higher coking coal and iron ore prices during the quarter. Power and fuel costs fell 14% YoY. Adjusted. international subsidiaries’ performance recovered due to improved market conditions and easing inflationary pressures in the U.S. and Europe, resulting in a 42% sequential growth in Ebitda.

JSW Steel is nearing completion of its capex plan of ~Rs 188 billion for FY24 primarily directed towards

1. bringing two coking coal and one thermal coal blocks on-stream,

2. capacity expansion by 5mt at Vijayanagar in Karnataka by end-FY24,

3. 1.5mt capacity expansion at Bhushan Power & Steel Ltd. in Odisha by end-FY24, and

4. maintenance capex. On-ground capex plans are estimated to take total crude steel production capacity to 37mt by FY25 while a subsequent capex plan to increase capacities to 50mt by 2030 is currently on the chalkboard.

We revise our FY24/FY25 Ebitda estimate lower by 13%/10% to factor in

1. a decline in steel prices,

2. rise in raw material costs, and

3. volume assumptions.

We introduce FY26 estimates and value JSW Steel at 6.5 times FY26E enterprise value/Ebitda, arriving at a revised target price of Rs 937/share (Rs 940/share earlier) accounting for increased net debt due to working capital build-up during the quarter.

The decline in Indian steel prices coupled with a rise in international prices has enabled import parity, a key positive likely to lead to better exports and improved international subsidiaries’ performance going forward. The rise in Chinese exports is a key risk.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.