Brokerages retained their bearish calls on JSW Steel after the steel player reported a 64.5 percent fall in its net profit for the quarter ended March.
JSW Steel reported that its net profit fell 64.5 per cent YoY to Rs 1,299 crore in the quarter ended March 31, 2024. Revenue for the quarter also fell 1.5 per cent to Rs 46,269 crore against Rs 46,962 in the previous fiscal.
This was likely due to higher coking coal prices and lower realizations amid bleak domestic steel prices.
JSW Steel reported sales and production growth remained strong and standalone sales at 5.69 MT in Q4 grew 9 per cent year-on-year and for the year at 21.22 also grew 8 per cent year-on-year. The company also highlighted it achieved combined annual production of 26.68 million tonne against its guidance of 26.34 million tonnes, which is a 101 per cent achievement. The sales Guidance was also met, with a 100 per cent achievement.
With ongoing expansions, strong domestic steel demand and rising export opportunities analysts expect strong uptick in production and sale performance. Analysts at Motilal Oswal Financial Services Ltd say Going forward, they expect JSW’s domestic volumes to be robust with increasing capacities, a better product mix, and export opportunities.
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With ongoing expansions, strong domestic steel demand and rising export opportunities analysts expect strong uptick in production and sale performance. Analysts at Motilal Oswal Financial Services Ltd say Going forward, they expect JSW’s domestic volumes to be robust with increasing capacities, a better product mix, and export opportunities.
The financial performance though strong, nevertheless showed impact of volatility in steel prices and raw material prices too.
The EBITDA reduced by 15 per cent sequentially, driven by lower sales realizations and higher coking coal cost. The consolidated reported profit for the quarter At Rs 1,322 crores, down by 46 per cent sequentially and around 64 per cent year-on-year. During 4QFY24, coking coal costs increased by $22 per tonne, which had an impact on earnings said analysts.
However given the current decline in coal prices analysts remain positive on outlook for JSW Steel. Notably 1QFY25 coal expenses are expected to be lower by $22 and 27 per tonne estimate analysts at Motilal Oswal Finacial Services.
Morgan Stanley retained its underweight call, with a target price of Rs 650 per share. This implies a downside of around 27.4 per cent from the previous close.
The brokerage said that it doesn’t see any material expansion in FY25, although domestic demand might see an uptick following the elections. A key risk for JSW Steel is the high level of steel imports from China.
While Citi maintained its sell rating on JSW Steel, the brokerage raised its target price on the metals major to Rs 750 apiece, which is lower by 18.4 per cent from current levels. The brokerage said that the full benefits of JSW Steel’s higher capacities will play out in FY26.
Kotak Institutional Equities also maintained its reduce call, as subdued steel spreads kept JSW Steel’s margins under pressure. However, the steel spreads have bottomed out, and the brokerage expects margins to recover in Q4.
Over the past year, JSW Steel shares have risen around 27 per cent, as compared to a 23 per cent gain in the frontline index Nifty 50.
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