JSW Steel share price gained over 3% in early trading session on Tuesday, following analysts’ bullish outlook and raised target prices despite the company’s weak Q4 results. The shares soared as much as 3.48%, reaching a record high of Rs 922.95 per share on the NSE.
On Friday, JSW Steel reported a 64% year-on-year (YoY) decline in its consolidated net profit, amounting to Rs 1,299 crore for the quarter ended March 2024, compared to Rs 3,664 crore in the same period last year.
Revenue from operations for the fourth quarter slightly decreased to Rs 46,269 crore, down from Rs 46,962 crore in the corresponding quarter of the previous year.
The operating EBITDA for the fourth quarter was Rs 6,124 crore, with an EBITDA margin of 13.2%. The operating profit declined by 15% quarter-on-quarter (QoQ) due to lower sales realizations and higher coking coal costs.
In terms of operations, crude steel production for the fourth quarter stood at 5.69 million tonnes, a 1% decrease QoQ and a 2% increase YoY. Standalone steel sales for the March quarter remained flat YoY but rose 9% QoQ to 5.69 million tonnes.
Brokerages on JSW Steel
JM Financials on JSW Steel
JM Financial maintains a ‘BUY’ rating on JSW Steel, citing a strong growth pipeline and an increased focus on cost efficiency as positive indicators for the company’s earnings trajectory.
According to a report by JM Financial, JSW Steel reported a consolidated EBITDA of Rs 61 billion for the fourth quarter, aligning with their estimates. This represented a 15% quarter-on-quarter (QoQ) decline, driven by lower sales realizations and higher coking coal costs.
The company’s standalone operating EBITDA for Q4 FY24 was Rs 44 billion, reflecting a 23% QoQ decrease and a 29% year-on-year (YoY) decline, with an EBITDA margin of 12.6%. The reduction in EBITDA was primarily attributed to higher coking coal prices and lower sales realizations.
In a move towards backward integration for captive coking coal sourcing, the Board approved the acquisition of Minas de Revuboe Limitada (MDR), which owns a high-quality, large-scale, pre-development stage premium hard coking coal mine project in Mozambique’s Moatize Basin. This project, one of the largest globally, boasts JORC reserves exceeding 800 million tons.
The company anticipates a reduction in coking coal consumption costs by USD 22-27 in Q1 FY25, amid rising steel prices, suggesting an improvement in spread. Consolidated capex for FY25 is projected to be Rs 200 billion.
JSW Steel’s net gearing (Net Debt to Equity) stood at 0.93x at the end of the quarter, compared to 1.02x at the end of Q3 FY24, and net debt to EBITDA was at 2.62x, down from 2.64x at the end of Q3 FY24.
Motilal Oswal on JSW Steel
Motilal Oswal upgraded JSW Steel from Neutral to BUY, setting a target price of Rs 1,070, premised on 7 times FY26 estimated EV/EBITDA.
Motilal Oswal, in a report on JSW Steel, highlighted the company’s favorable positioning with new capacities coming online, robust domestic demand, improving exports, and an increasing share of value-added sales.
They emphasized JSW Steel’s focus on enhancing its captive share of iron ore and improving coal linkages to bolster earnings.
The report noted JSW Steel’s sturdy balance sheet and strong cash flow generation, enabling the execution of its planned five-year capital expenditure program. Currently, JSW Steel is trading at 6.1 times FY26 estimated EV/EBITDA.
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