Brokerages largely unchanged on view towards JSW Steel despite Q3 profit decline

jsw steel

Brokerages have largely retained their ratings and target prices for JSW Steel Ltd, following the company’s announcement of a 71 percent year-on-year decline in net profit for the December quarter. JM Financial, Anand Rathi, Elara Capital, and Antique Stock Broking maintained their ratings and kept target prices mostly unchanged.

JM Financial reiterated its buy rating, raising the target price by 3 percent to Rs 1,160 per share. Similarly, Anand Rathi maintained a buy rating, revising the target price to Rs 1,100 from Rs 1,080 per share. Antique Stock Broking kept its hold rating with a target price of Rs 870 per share, while Elara Capital upheld its reduce rating with an unchanged target price of Rs 909 per share.

Systematix Institutional Equities upgraded its rating to buy, revising the target price to Rs 1,091 per share. On the other hand, Dolat Capital initiated coverage with a reduce rating, setting the target price at Rs 950 per share.

The management has reduced its FY25 volume guidance by 2 percent. Although lower coking coal and iron ore prices are expected to support near-term margins, oversupply in domestic and global flat steel markets is anticipated to limit significant price recovery. Furthermore, with JSW Steel trading close to its historical average valuation, brokerages see limited upside potential.

The company posted a net profit of Rs 719 crore in Q3FY25, a sharp decline compared to the previous year, largely due to falling steel prices amidst continued pressure from Chinese steel imports. However, volumes demonstrated resilience, both annually and sequentially. Notably, a Moneycontrol poll had estimated a steeper decline in net profit to Rs 639 crore. Consolidated operating EBITDA margins stood at 13.5 percent, compared to 17.1 percent a year ago. Meanwhile, consolidated revenue dropped marginally by over 1 percent to Rs 41,378 crore, aligning with analysts’ expectations.

JSW Steel reported consolidated crude steel production of 7.03 million tonnes (mt), reflecting a 2.3 percent year-on-year and 3.8 percent sequential growth. This growth was supported by the ramp-up of capacities at Bhushan Power & Steel Ltd (BPSL) and Jindal Vijayanagar Metallics Ltd (JVML). Steel realisations averaged Rs 61,666 per tonne, marking declines of 11.8 percent year-on-year and 4.7 percent sequentially. Value-added and special products increased by 12 percent year-on-year and 9 percent sequentially, contributing 60 percent to total sales. Standalone EBITDA for the quarter stood at Rs 4,400 crore, down 24 percent year-on-year and 5 percent sequentially, falling 10 percent short of estimates. The US operations, including Ohio and Texas, underperformed due to weaker steel prices but showed signs of recovery in delivery volumes. Capex during the quarter amounted to Rs 3,000 crore, and net debt declined by Rs 1,900 crore sequentially, ending at Rs 80,900 crore.

Antique Stock Broking highlighted that domestic steel demand remains robust, and China’s recently announced stimulus measures could stabilise global steel prices. The fourth quarter of FY25 is expected to benefit from the continued ramp-up of the BPSL Phase 2 expansion and the 5 mtpa Vijayanagar brownfield project, with full benefits expected by FY26. The firm anticipates a 3.5–4 percent reduction in steel realisations and a 10–15 percent decline in coking coal costs, leading to a projected reduction in FY25/26/27 EBITDA by 16 percent, 5 percent, and 4 percent, respectively.

JSW Steel aims to expand its installed capacity to 43.5 mtpa by the first half of FY28 and further to 51 mtpa by FY31, targeting a consolidated sales volume of approximately 27 million tonnes in FY25. Dolat Capital acknowledged the company’s strong volume expansion plans, improved product mix with a greater share of value-added and specialty products, and raw material securitization efforts. However, they remain cautious and prefer better entry levels despite JSW Steel achieving its best-ever domestic quarterly sales volume in Q3FY25.