Prabhudas Lilladher's research report on JSW Steel
JSW Steel (JSTL) posted Q3FY21 EBITDA 7% below our estimates due to lower than expected costs. However, earnings were above consensus estimates by 10%. Steel prices soared nearly 55% over last six months on back of strong pentup demand and severe supply constraints. Supplies are coming back strongly as visible in increasing production levels month after month. Softening in demand and revival in supplies poses strong headwinds to prices. Hence, we believe that global prices have peaked out as visible in above mean spreads.
We maintain our negative outlook on the stock due to stretched valuations (EV/EBITDA of 6x FY22e) and peaked out margins. We maintain Reduce with TP of Rs335 (earlier Rs380), EV/EBITDA of 5.75x FY22e.