Neutral JSW Steel; target of Rs 910: Motilal Oswal

Motilal Oswal's research report on JSW Steel

JSTL posted consolidated revenue of INR419b (up 7% YoY), which was in line with our estimate of INR411b. ASP for 3QFY24 stood at INR69,900/t (up 2% YoY), INR236/t higher than our estimate of INR69,664/t. EBITDA stood at INR72b (up 58% YoY), 9% above our estimate of INR66b. EBITDA/t stood at INR11,967/t, INR807/t higher than our estimate of INR11,159/t. Record dispatches to OEM, auto, RE, and packaging sector along with better operating performance from overseas subsidiaries supported the performance, which was partially offset by lower exports and lower offtake during festive holidays and higher input costs. APAT stood at INR23b (up 366% YoY), 9% above our estimates of INR21b. During 3QFY24, JSTL recognized an unrealized gain of INR1.35b, resulting from the dilution of interest in the company’s JV. This gain was accounted for as ‘other income’. Combined crude steel production stood at 6.9mt (up 12% YoY) and sales volumes came in at 6mt (up 5% YoY). The volumes were driven by higher capacity utilization and better demand scenario in the USA. Net debt in 3QFY24 increased INR100b to INR792b, with a net debt-toEBITDA ratio of 2.64x (up from 2.52x in 2QFY24) and D/E ratio of 1.02x (up from 0.92x in 2QFY24). Revenue for 9MFY24 was up 8% YoY to INR1,287b; EBITDA was up 108% YoY to INR221b and APAT stood at INR77b.

Outlook

JSTL is trading at 5.9x FY26E EV/EBITDA and 2x FY26E P/B. We reiterate our Neutral rating on the stock with a TP of INR910 (6.5x FY26E EV/EBITDA). While we remain positive on the company’s growth prospects, we believe the current valuations reflect the strong outlook.