Neutral JSW Steel; target of Rs 780: Motilal Oswal

Motilal Oswal recommended Neutral rating on JSW Steel with a target price of Rs 780 in its research report dated October 21, 2023.

Broker Research

October 23, 2023 / 12:58 IST

Neutral

Motilal Oswal's research report on JSW Steel

JSTL posted revenue of INR446b in 2QFY24 (up 7% YoY), 6% above our estimate of INR423b. ASP stood at INR69,772/t (higher than our estimate of INR67,783/t). EBITDA stood at INR79b (up 350% YoY), 20% above our estimate of INR66b. EBITDA was supported by higher volumes and lower coking coal cost during the quarter. It was partially offset by lower realizations and subdued performance in international subsidiaries. EBITDA/t stood at INR12,341/t vs. our estimate of INR10,527/t. APAT stood at INR31b as against loss of INR14b in 2QFY23. Combined crude steel production (incl. JISPL) stood at 6.4mt (up 13% YoY) and sales volumes came in at 6.39mt (up 11% YoY). The volumes were driven by higher demand in the domestic market and inventory liquidation of 0.3mt, which was partially impacted by maintenance shutdowns. Net debt stood at INR692b, with a net debt-to-EBITDA ratio of 2.52x (down from 3.14x in 1QFY24). Revenue for 1HFY24 was up 9% YoY to INR868b and EBITDA was up by 147% YoY to INR149b.

Outlook

We believe the current valuations at 5.9x FY25E EV/EBITDA and 2.1x FY25E P/B fully price in the positives. We reiterate our Neutral rating on the stock with a revised TP of INR780 (INR740 earlier).

For all recommendations report, click here