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JSW Steel reported 2Q consol. EBITDA of INR79bn, higher than JMfe of INR73bn. The beat was primarily driven by higher than expected coking coal benefits and significantly improved scale of operations. Standalone EBITDA came in at INR69bn, implying an EBITDA/t of INR12.8k– up INR3k/t QoQ on account of higher scale of operations (+10% volumes) and sharply lower coal cost. BPSL reported an EBITDA of INR7.5bn vs INR7bn in 1Q while JSW coated reported an EBITDA of INR4.1bn vs INR3.9bn. Net debt stood at INR692bn upINR24bn QoQ primarily on account of JSW Ispat merger. Key takeaways from the call are a) coking coal cost is expected to increase by be contingent on sustainability of current raw material price - demand not being a problem c) Post FY25 - capacity to increase from 37mn tons to 50 mn tons through brownfield growth at Vijayanagar, Dolvi and BPSL. JSW continues to aggressively add capacity across facilities – a) Vijaynagar expansion to be completed by FY24 end b) BPSL Phase-II expansion (from 3.5mtpa to 5mtpa) is expected to be completed by FY24. Strong growth pipeline and increased focus on cost efficiency augurs well for the company. Maintain BUY.

* Higher coking coal benefits and higher scale of operations aid standalone margins: Sales for the quarter was 5.4mn tons, up 10% QoQ given strong economic momentum and consequent higher steel consumption. Realisations declined by ~4k/ton QoQ as steel prices moderated. EBITDA/ton came in at INR12.8k, above JMfe of INR10k. The EBITDA was higher QoQ primarily due to higher sales volumes and higher coal price benefits, partially offset by lower realisation. Net profit stood at INR27bn vs INR17bn in 1Q.

* Indian subsidiaries report significantly improved performance; foreign subsidiaries disappoint: JSW Coated reported an EBITDA of INR4.1bn in 2Q vs EBITDA of INR3.9bn in 1Q. Ohio operations reported an EBITDA loss of US$29mn vs EBITDA gain of US$2.4mn in 1Q. US plate and pipe mill registered an EBITDA of US$26mn vs US$45.0mn in 1Q. BPSL reported sequentially up revenues (6% QoQ) with EBITDA at INR7.5bn vs EBITDA of INR7bn in 1Q. The decline in EBITDA/ton was primarily due to lower realisations.

* Net Debt increases due to JSW Ispat merger; projects on track: Company reported a net debt of INR692bn up INR24bn QoQ on account of JSW Ispat merger. The company incurred a capex of INR38bn during the quarter. The 5mtpa brownfield expansion at Vijaynagar is progressing well, with civil works underway and long lead time items ordered. The company expects Vijaynagar expansion to be completed by end FY24. BPSL Phase-II expansion (from 3.5mtpa to 5mtpa) is expected to be completed by end FY24. The company commissioned colour coated steel line of 0.25mtp at Rajpura in May while 0.12mtpa steel line in J&K is expected to be completed by Q4FY24. Capex guidance for FY24/25 stands at INR188bn/185bn. Post FY25 – JSW plans to increase capacity to 50 mn tons through brownfield growth at Vijayanagar, Dolvi and BPSL.

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CIN Number : L67120MH1986PLC038784