Motilal Oswal's research report on JSW Steel
JSW Steel (JSTL)’s consolidated net sales increased to INR391b in 3QFY23 (up 3% YoY and down 6% QoQ), 13% lower than our estimate of INR448b. Consolidated EBITDA at INR45b (down 50% YoY and up 160% QoQ) was 18% lower than our estimate of INR55b. This was due to higher input costs and reduction in ASP. EBITDA/t stood at INR7,963/t, lower than our estimate of INR 9,235/t. JSTL reported an APAT of INR5b (v/s loss INR14b QoQ). Finance costs stood at INR18b (up 42% YoY and 19% QoQ). Net Debt rose to INR695b, but JSTL expects it to come down in the near term. The increase in debt can be attributed to forex impact and inventory buildup, which the company expects to reverse in 4QFY23.
The stock trades at 6.2x on FY24E EV/EBTIDA and appears to be fully discounting the benefits, which are likely to accrue through FY24. We marginally reduce our estimates for FY24 and reiterate our Neutral rating with a revised TP of INR710 (v/s previous TP of INR 760) based on 6x FY24E EV/EBITDA.