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Performs well; announces large capex plan....

JSW Steel reported a healthy operational performance in Q4FY21 wherein consolidated topline and EBITDA came in higher than our estimate while consolidated PAT came in line with our estimates. Consolidated topline for Q4FY21 was at | 26934 crore, up 51% YoY, 23% QoQ, higher than our estimate of | 25365 crore. Consolidated EBITDA was at | 8440 crore, up 184% YoY, 42% QoQ, higher than our estimate of | 8038 crore. Consolidated EBITDA margin were at 31.3% in Q4FY21, compared to 27.2% in Q3FY21 and 16.6% in Q4FY20 (our estimate of 31.7%). For Q4FY21, on a standalone basis, JSW Steel reported sales volume of 4.06 MT (up 10% YoY), marginally higher than our estimate of 4.0 MT. Standalone EBITDA/tonne came in at | 19756/tonne, broadly in line with our estimate of | 19000/tonne (| 14444/tonne in Q3FY21 and | 8703/tonne in Q4FY20). Ensuing consolidated PAT was at | 4191 crore, up 57% QoQ, in line with our estimate of | 4260 crore.

FY22 volume guidance…

For FY22E, for the standalone entity the company has given sales volume guidance of 17.4 million tonnes (MT), of which existing operations will contribute sales volume of 16 MT, while the Dolvi Phase 2 expansion (whose full integrated operations are likely to be commissioned in September 2021) will contribute the balance 1.4 MT. In addition, JSW Steel US Ohio sales volume guidance for FY22E is 1 MT. Of the joint control and associate companies, for FY22E the sales volume guidance for Bhushan Power and Steel is 2.6 MT and JSW Ispat Special Products is 0.63 MT. Subsequently the combined FY22E sales volume guidance is 21.63 MT.

Announces large capex plan…

JSW Steel has chalked out plans to incur capex to the tune of | 47457 crore over the next three years (i.e. in FY22E-24E). This capex includes balance ongoing capex of | 22342 crore and new announced capex plan of | 25115 crore. The new capex plan includes | 15000 crore to be spent towards 5 MTPA brownfield expansion at Vijayanagar, | 100 crore towards 120 KTPA colour coated line at J&K, | 3450 crore towards Odisha mining (own mining infrastructure, beneficiation and digitization) and balance | 6565 crore toward sustenance capex. Of the cumulative amount of | 47457 crore, the company plans to incur capex of | 18240 crore in FY22E, | 17465 crore in FY23E and | 11752 crore in FY24E.

Valuation & Outlook

JSW Steel reported a strong operational performance in Q4FY21, primarily on the back of healthy uptick in realisations. Going forward, for JSW Steel standalone operations, we model EBITDA/tonne of | 18000/tonne for FY22E and | 15000/tonne for FY23E (standalone EBITDA/tonne of | 12943/tonne in FY21) and model standalone sales volume of 17.4 MT in FY22E and 20 MT in FY23E (standalone sales volume of 14.9 MT in FY21). We value the stock on an SoTP basis and arrive at a target price of | 800 (earlier | 675). We upgrade the stock from HOLD to BUY recommendation.

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