Reduce JSW Steel; target of Rs 525: Sharekhan

Sharekhan's research report on JSW Steel

Q2FY23 consolidated reported EBITDA at Rs. 1,752 crore (down 59% q-o-q) missed our estimates due to margin pressure at standalone business, negligible EBITDA contribution from subsidiaries and several one-offs of totaling to Rs. 1,480 crore. Standalone EBITDA margin declined sharply by 58% q-o-q due to steep fall in the blended realisation by 14% q-o-q offsetting decline in cost and 24% q-o-q rise in volume. JSW Steel Coated, BPSL and Ohio US operation reported operating loss of Rs. 79 crore/Rs. 183 crore/$40 million. Management maintained sales volume guidance of 24mmt for FY23 and indicated that steel price has bottomed while coking coal price is likely to be lower by $80/tonne q-o-q in Q3FY23. We have lowered our FY23E/FY24E earnings estimate by 19%/6% to factor sharp Q2FY23 margin miss.

Outlook

We maintain our Reduce rating on JSW Steel with an unchanged PT of Rs. 525 as weak steel price to impact earnings, likely increase debt and impact growth capex. The stock trades at 8x FY24E EV/EBITDA.

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JSW Steel - 221022 - khan