JSW Steel Q4 Results Review - Improved Show, But Leverage Never Sleeps: ICICI Securities

"BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..JSW Steel’s (JSTL) Q4FY23 EBITDA surpassed consensus estimates. Key points: 1) consolidated EBITDA surged 75% QoQ to Rs.79.4bn (down 14% YoY) owing to positive price-cost effect, mainly at standalone operations; 2) both shipments and EBITDA/te at the standalone level were ahead of estimates; 3) performance of all the subsidiaries improved; 4) gross debt was down by just Rs6.1bn QoQ to Rs800.6bn. Going ahead, management expects combined sales volumes at 25mnte for FY24 (FY23: 22.8mnte) and coking benefits to flow in from Q2FY24. In our view, the risk-reward in JSTL stock is balanced at this stage. On one hand, volume growth in FY24E/FY25E is likely stay ahead of peers and, on the other, debt remains high and is unlikely to come off in light of the company’s capital commitments. That said, the stock price has corrected and is trading near its 10- year historical mean EV/EBITDA. We introduce FY25E numbers at this stage and roll over to FY25E valuations. Our revised target price is Rs675 (earlier: Rs550) on an unchanged multiple of 6.2x FY25E EBITDA. Upgrade to HOLD (from Sell)..DISCLAIMER This report is authored by an external party. BQ Prime 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 BQ Prime.Users have no license to copy, modify, or distribute the content without permission of the Original Owner."

JSW Steel Q4 Results Review - Improved Show, But Leverage Never Sleeps: ICICI Securities