Sharekhan has given Buy recommendation for JSW Steel with a target price of Rs. 850 in its research report issued on Jul 23, 2021
Sharekhan’s research report on JSW Steel
Q1FY22 consolidated EBITDA at Rs. 10,274 crore (up 22% q-o-q) beat ours and the street’s estimates, led by higher-than-expected EBITDA/tonne at Rs. 29,608/tonne (up 42% q-o-q). Volumes declined 14.5% q-o-q to 3.5 mt due to weak demand in India because of lockdowns. Overseas subsidiaries performed well with positive EBITDA contribution of Rs. 282 crore (versus an EBITDA loss of Rs. 322 crore in Q4FY2021) led by a turnaround in the US subsidiary Acero. Bhushan Power and Steel (jointed controlled entity) also performed well with PAT of Rs. 745 crore in Q1FY22. Management maintained its standalone crude steel sales volume guidance of 17.4 mt, while Dolvi expansion is on track to get commissioned by September 2021. Domestic steel price is at 15-20% discount to imported steel price and focus on production cuts in China bodes well for sustained high steel price/margin.
We maintain a Buy on JSW Steel with a revised PT of Rs. 850, given a robust earnings growth outlook, focus on downstream value-added products and potential long-term value creation from recently-acquired steel assets. At CMP, the stock trades at 6.9x FY2023E EV/EBITDA.