Accumulate JSW Steel Ltd. For Target Rs.959 - Elara Capital
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Scouting overseas for coking coal security
Standalone operations in line; subsidiaries outperform
JSW Steel’s (JSTL IN) Q4 consolidated net sales dipped ~2% YoY but grew ~10% QoQ to ~INR 456bn. EBITDA fell ~23% YoY/15% QoQ to ~INR 61bn. Adjusted PAT declined ~65% YoY/46% QoQ to ~INR 13bn. Net debt stood at ~INR 739bn as of March 2024 versus ~INR 593bn as of March 2023 and ~INR 792bn as of December 2023.
EBITDA/tonne down ~25% YoY and ~24% QoQ
Consolidated sales volume grew ~3% YoY/12% QoQ to 6.73mn tonnes. Realization fell ~4% YoY/2% QoQ to INR 67,825/tonne. Operating cost rose ~3% QoQ but was flat YoY at INR 59,651/tonne. Thus, EBITDA/tonne contracted ~25% YoY/24% QoQ to INR 9,100.
JSTL aims for 50mn tonne capacity in India by FY31
JSTL’s current capacity in India, including 6.5mn tonnes under commissioning, is 34.7mn tonnes and may increase to ~37mn tonnes by FY25. By September 2027, JSTL aims to reach 42mn tonnes through the addition of 5mn tonnes at its Maharashtra-based Dolvi unit and 0.3mn tonnes at JSW Ispat Special Products (JISPL). Further, JSTL targets to reach a capacity of 50mn tonnes by FY31. Key potential future expansions include: 1) brownfield expansion of ~5mn tonnes each at Bhushan Power & Steel (BPSL) and at the Vijayanagar plant in Karnataka, 2) a 4mn tonne green steel capacity in two phases, 3) a greenfield electric arc furnace (EAF) plant at Kadapa in Andhra Pradesh and 4) a greenfield expansion of ~13mn tonnes capacity in Odisha.
Valuation: reiterate Accumulate with a higher TP of INR 959
JSTL seems well positioned to post healthy volume growth, led by phase-wise completion of ongoing expansion projects. In H1FY25, JSTL is also expected to benefit from softening in coking coal prices. Further, focusing on various cost-saving initiatives and value-added products bode well for margin. Thus, we reiterate Accumulate. We lower our FY25E/26E EBITDA by ~17%/14%, respectively, to factor in weak steel prices and delayed ramp-up in new capacity. However, as we roll over to March 2026E from December 2025E, we up our TP to INR 959 from INR 909, based on 7x (unchanged) March 2026E EV/EBITDA.
Please refer disclaimer at Report
SEBI Registration number is INH000000933
