Buy JSW Steel; target of Rs 375: ICICI Direct

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ICICI Direct's research report on JSW Steel

JSW Steel reported stellar Q4FY18 numbers. Sales volume for the quarter was at 4.22 million tonnes (MT), up 7% YoY, 6% QoQ, higher than our estimate of 4.0 MT. Consolidated topline for the quarter was at Rs 20817 crore (up 25% YoY, 17% QoQ) significantly higher than our estimate of Rs 18820.6 crore primarily due to healthy realisations Standalone operations posted a robust EBITDA/tonne of Rs 11950/tonne significantly higher than our estimate of Rs 10000/tonne (Q3FY18: Rs 9000/tonne, Q4FY17: Rs 7586/tonne). Consolidated EBITDA came in at Rs 5290 crore (up 67% YoY, 37% QoQ, higher than our estimate: Rs 4288.7 crore). The resultant consolidated EBITDA margin was at 25.4% vs. our estimate: 22.8% The company reported other income of Rs 45 crore, depreciation of Rs 865 crore and interest & finance cost of Rs 883 crore. The ensuing consolidated PAT came in at Rs 2879 crore.

Outlook

We value the stock on an SOTP basis assigning 6.5x FY20E EV/EBITDA to the core and factoring in CWIP till FY20E at 0.7x book. Hence, we arrive at a target price of Rs 375. We maintain our BUY recommendation on the stock.

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