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Jan 28, 2013, 02.16 PM IST | Source: Moneycontrol.com

Here's what analysts expect from JSW Steel Q3

An improved demand scenario at the end of December quarter may partly boost JSW Steel’s overall Q3 performance, say analysts. However, key factors like lower plant utilisation levels due to iron ore shortage along and mining ban in Goa and Karnataka are likely to bloat operating cost of the company.

Moneycontrol Bureau

An improved demand scenario at the end of December quarter may partly boost JSW Steel's overall Q3 performance, say analysts. However, key factors like lower plant utilisation levels due to iron ore shortage along with  mining ban in Goa and Karnataka, forcing the company to outsource raw material at higher cost, will continue to bloat cost at operating level.

Like its peers, JSW Steel could not undertake price hike due to subdued demand scenario in Oct-Nov and this will show up in earnings, say sector analysts.

Brokerages point out that overall, it will be a moderate quarter for the company on improved volumes but losses from JSW Ispat ( which it acquired last year) along with poor contribution from overseas subsidiaries may impact performance.

The company which will announce standalone numbers later in the day.

Meanwhile, JSW, which has been trying hard to protect margins may not see sharp improvement due to suspension of mining in Karnataka and Goa, forcing it to source iron ore at higher price. Increased freight cost following a hike in diesel price in September is likely to squeeze margins further.

However, sales and profit figures estimated by brokerages vary largely on different set of reasons. A few say, that average utilisation levels of its units stood at around 70%  due to iron ore shortage, some of them also point out that despite coking coal prices declining during the quarter, it will be offset by lower volumes resulting in EBITDA decline of around 24 percent, QoQ.

According to CNBC--TV18 poll, JSW's Q3 profit will be up 84.3% (YoY) to Rs 310 crore (excluding forex loss). Net sales will also climb 2.5% to Rs 8058 crore.

Karvy Broking in a preview note expects net profit to fall around 70% to Rs 248.7 crore, QoQ due to forex loss (amount not mentioned). Sales are also likely to decline around 10% to Rs 7975 crore, QoQ due to lower sales volume.

According to Angel Broking, overall sector profitability is expected to improve, YoY on the back of decreasing prices of coking coal. The firm points out that due to improved demand situation, JSW too will see sales grow 8.5% to Rs 8531 crore, YoY, despite demand picking up toward the end. The company’s profit will also rise to 451 crore, but will be down 33%, YoY.

Prabhudas Lilladher points out that consolidated revenue of the company may fall 7.8% to Rs 8740 crore, QoQ due to lower realisation in blended category. Profit before minority interst and share of loss or profit from associate firms is likely to fall 41%,QoQ to Rs 180 crore.

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