Hold JSW Steel; target of Rs 1068: Prabhudas Lilladher

Prabhudas Lilladher's research report on JSW Steel

JSW Steel (JSTL) reported strong cons operating performance led by higher steel pricing. Cons volume grew 9.3% YoY aided by the ramping up of 5mtpa JVML capacity and strong domestic demand. Average cons NSR improved 7% QoQ on higher steel pricing across the regions. Decline in coking coal consumption cost by USD14/t was negated by higher shutdown costs, enabling JSTL to deliver cons EBITDA/t of Rs11,837 (adjusting for forex M2M loss of Rs3.43bn). Adj. std EBITDA/t was at Rs11,270, tad better than PLe of Rs11,087. Steel prices have started correcting since Jun due to monsoon-led weakness in demand and cheaper imports, which would impact EBITDA/t going forward. GoI is watching the imports situation and can increase and extend safeguard duty implemented earlier. We believe a) ramping up of JVML having lower conversion cost, and b) rising proportion of VAP would drive earnings growth over FY25-27E; however, concerns over SC order remains.

Outlook

We expect volume/ EBITDA CAGR of 12%/40% over FY25-27E. At CMP, the stock is trading at 8.9x/7.3x EV of FY26/27E EBITDA. Maintain ‘Hold’ with TP of Rs1,068, valuing at 7.5x EV of Mar’27E EBITDA.

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