Neutral JSW Steel Ltd For Target Rs. 700 - Motilal Oswal Financial Services
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Consolidated performance
* JSTL posted revenue of INR470b in 4QFY23 (flat YoY), in line with our estimate of INR455b. ASP came in at INR71,917/t.
* EBITDA stood at INR79b (down 14% YoY), 11% above our estimate of INR72b. EBITDA was supported by higher volumes, better realizations and lower coking coal and energy costs. EBITDA/t stood at INR12,158 v/s our estimate of INR11,329.
* JSTL reported an APAT of INR37b (down 8% YoY), 26% above our estimate, driven by a better operating performance and a lower tax outgo.
* Sales volumes stood at 6.5mt (up 27% YoY), in line with our estimate of 6.4mt and aided by strong volumes in India operations.
* Revenue/EBITDA/APAT for FY23 stood at INR1,660b/INR185b/INR36b (up 13% YoY/down 53% YoY/down 83% YoY).
* Net debt stood at INR585b, with a net debt-to-EBITDA ratio of 3.2x. JSTL expects net debt to be in the same range in FY24 (INR30b of debt from JISPL will be added to JSTL’s consolidated balance sheet in FY24E).
Standalone performance
* Revenue stood at INR372b (up 3% YoY), in line with our estimate of INR360b. EBITDA came in at INR62b (down 10% YoY) and APAT stood at INR28b (down 16% YoY).
* Revenue/EBITDA/APAT for FY23 stood at INR1,317b/INR154b/INR49b (up 11% YoY/down 52% YoY/down 72% YoY).
*JSTL on track to enhance its domestic capacity
* BPSL has completed its Phase I expansion, which has taken its total capacity to 3.5mt, and the Phase II expansion is expected to be completed in FY24, which will enhance its capacity to 5mt.
* The 5mt expansion at Vijayanagar is on track to be completed in FY24, and its full benefits will accrue from FY25-26 onward.
Highlights from management commentary
* In 4QFY23, the coking coal cost was down by USD6/t QoQ for JSTL. In 1QFY23, JSTL expects the coking coal cost to increase by USD10-15/t. Coking coal prices have corrected sharply in the last couple of months and its benefits will reflect in 2QFY24. * JSTL has earmarked a capex of ~INR190b in FY24, mainly for the Vijayanagar facility, BPSL phase II expansion, new mines and enhancement of downstream capacities.
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