IGI Logo

Mixed bag performance….

About the stock: JSW Steel is one of the leading integrated steel companies in India. It has a strategic collaboration with global leader JFE Steel of Japan, enabling JSW to access new and state-of-the art technologies to produce and offer high value special steel products to its customers.

* JSW Steel’s manufacturing unit in Vijayanagar, Karnataka is the largest single location steel-producing facility in India with a capacity of 12 MTPA

* JSW Steel is the only Indian steel company to be ranked among the top 10 global steel producers by World Steel Dynamics for 10 consecutive years

Q3FY22 Results: JSW Steel reported a mixed set of numbers for Q3FY22.

* On a standalone basis, for Q3FY22 JSW Steel reported sales volume of 4.0 million tonnes (MT) (up 2.6% YoY, 5.7% YoY), higher than our estimate of 3.9 MT. During the quarter, consolidated operating income was at | 38071 crore (up 74% YoY, 17% QoQ)

* Standalone EBITDA/tonne was at | 16993/tonne, lower than our estimate of | 18000/tonne (| 22884/tonne in Q2FY22 and | 14444/tonne in Q3FY21). Standalone EBITDA was at | 6797 crore, up 21% YoY but down 22% QoQ. Consolidated EBITDA was at | 9132 crore (up 54% YoY but down 12% QoQ), broadly in line with our estimate of | 9270 crore. During the quarter, provision was made towards mining premium and royalties on account of revision in Indian Bureau of Mines (IBM) iron ore prices and the impact of same on Q3FY22 P&L was | 1056 crore

* Ensuing consolidated PAT for Q3FY21 was at | 4516 crore (up 69% YoY but down 37% QoQ), lower than our estimate of | 5440 crore

What should investors do? JSW Steel’s share price has given a return of ~70% over the last 12 months (from ~| 375 in Jan 2021 to ~| 667 levels in Jan 2022).

* We maintain our HOLD rating on the stock.

Target Price and Valuation: We value JSW Steel at | 725, based on SoTP valuation

Key triggers for future price performance:

* The 5 MTPA expansion at Dolvi (Phase 2 expansion) has commenced integrated steel operations in October 2021 and commercial production has started on November 15, 2021. Ramp-up is under way

* Over FY21-23E, we expect JSW Steel’s consolidated topline to grow at a CAGR of 35%, while consolidated EBITDA and PAT is expected to register a CAGR of 33% and 47%, respectively

Alternate Stock Idea: In our metal sector coverage, we like Hindalco.

* Hindalco is the world’s largest aluminium company by revenue and a major player in copper segment.

* BUY with a target price of | 600

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer