JSW Steel Shares Fall As Analysts Cut Targets After Q4 Results
Here's what analysts have to say about JSW Steel's Q4 results.
Shares of JSW Steel Ltd. fell after most analysts cut target prices for the company on account of a decline in Ebitda per tonne and margin amid lower steel prices and higher input costs.
The steelmaker's premium valuation compared to peers leaves little room for upside for the stock, analysts said in their post-earnings research reports.
JSW Steel saw its consolidated profit decline 26% sequentially on a Rs 710-crore exceptional item. It spent Rs 14,198 crore as capex in FY22 against the planned Rs 18,240 crore, as well lowered the capex guidance for FY23.
Shares of JSW Steel fell over 4% in intraday trade on Monday. The stock's trading volume is nearly quadruple the 30-day average.
Of the 33 analysts tracking the stock, 15 maintain a 'buy', seven suggest 'hold' and 11 recommend a 'sell', according to Bloomberg data. The average of the 12-month consensus price target implies an upside of 17.1%.
Here's what analysts have to say about JSW Steel's Q4 results.
CLSA
Maintains 'sell', cuts target price to Rs 500 apiece from Rs 550.
Q4 Ebitda in line; uncertainty to drive underperformance.
Estimates FY23 profitability of Rs 10,000 (FY22: Rs 19,266).
JSW Steel hopeful of a rollback of the recently imposed export duty.
With ongoing expansionary capex across assets, we expect leverage to remain high.
Remains cautious on ferrous names given cost pressure and a cap on realisations.
Cuts consolidated Ebitda estimates by 3-5% mainly on higher costs.
Jefferies
Reiterates 'underperform', hikes target price to Rs 550 from Rs 450.
JSW Steel's Q4 Ebitda rose 1% QoQ and was 10% above Jefferies' estimates.
Standalone Ebitda/tonne fell 20% QoQ, third consecutive quarter of decline.
Decline was led by lower steel prices and higher input costs.
Expects margin fall in FY23 as the full impact of coking coal cost increase is yet to flow.
Recent export duty poses downside risk to Indian steel prices.
Cuts FY23-24 EPS estimates by 18-22% and are 35-37% below street.
Stock is down 16% CYTD and has underperformed Nifty by 9%.
Its 1.7x FY23E price-to-book value for 15% ROE leaves little room for disappointments.
Citi
Downgrades JSW Steel to 'neutral' from 'buy', cuts target price to Rs 560 from Rs 810.
Stock has reacted negatively to the imposition of export duties in India.
Any positive newsflow from China hereon would drive the stock.
Current valuations suggest less upside relative to peers.
JSW Steel trades at 1.5x P/B versus Tata Steel at 0.9x and SAIL at 0.5x.
The benefit of lower iron ore prices relative to integrated plays may get offset by higher export volumes.
JSW Steel is continuing with ongoing capex plans.
Nomura
Downgrades to 'reduce' from 'neutral', cuts target price to Rs 500 from Rs 548.
Sees steel spreads shrinking further in H1 FY23.
Q4 FY22 results highlighted a trend of declining Ebitda/tonne.
Sales volumes beat estimates but Ebitda/tonne was a miss, resulting in overall miss.
Near-term coking coal inflation hits spreads as prices remain under pressure.
Estimates Ebitda/tonne in Q1 FY23 to drop below Rs 10,000 from Rs 13,000 in Q4.
Export duty on steel in a weak demand environment negatively affects pricing.
Not much hopeful of a global demand recovery by China.
Cuts Ebitda estimates by 25% for FY23/24.
