Sharekhan's research report on JSW Steel
Q1 consolidated operating profit of Rs. 5,510 crore (down 10% q-o-q) was impacted by the inventory write offs because of decrease in steel price and planned maintenance shutdown in India. Exports from China are putting a pressure on steel prices.Company reported a consolidated revenue of Rs. 42,943 crore (+1.7% y-o-y; -7.2% q-o-q). It was down q-o-q because of lower exports. In overseas subsidiaries, USA was affected by low steel prices while the Italy business was stable q-o-q.The company maintained its FY25 consolidated steel sales volume guidance of 27 mt and plans to expand steel production capacity to 43.5 mt/51.5 mt by FY27/FY31. The confidence is there because of the rise in steel consumption in India with the thriving infrastructure and real estate sector. However, the near term outlook for steel is soft with decrease in prices because of weak demand and exports from China.
Outlook
We maintain our Reduce rating on JSW Steel with a revised PT of Rs. 850, given the rich valuations of 9.5x/7.2x FY25E/FY26E EV/EBITDA and elevated debt.
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