Shares of JSW Steel Ltd have delivered flat returns in 2023. The stock is down 2% in 2023, leaving investors of the leading steel manufacturer guessing about the outlook of the steel stock. However, JSW Steel shares have risen 18% percent in a year and zoomed 136.54% during the last three years. The company reported its Q2 earnings on October 20, which came above estimates. However, the stock has fallen from Rs 770 on October 20 to Rs 760 in the current session.
JSW Steel shares climbed 1.54% to Rs 759.50 in early trade today against the previous close of Rs 747.95 on BSE. A total of 0.11 lakh shares of the firm changed hands amounting to a turnover of Rs 85.07 lakh on BSE. Market cap of the firm rose stood at Rs 1.85 lakh crore on BSE. The stock hit a 52-week high of Rs 840 on September 12, 2023 and a 52 week low of Rs 619 on October 24, 2022. Conveyor Idler
Here’s a look at what brokerages said on the outlook of the stock post Q2 earnings.
Kotak Institutional Equities has trimmed its EBITDA estimates by 2.4%/3.5%/3.2% for FY2024/25/26E mainly led by cut in overseas earnings (US Ohio and Italy),partly offset by weaker rupee forecast for FY2024-26E.
“Our fair value (FV) increases to Rs 820 (Rs 750earlier) as we roll forward to September 2025E (from March 2025E) at an unchanged 6.5X EV/EBITDA. Maintain REDUCE,” said the brokerage.
Centrum Broking has upgraded its rating to ‘Add’ from ‘Reduce’ on the stock post Q2 earnings.
“We factor in margin compression in H2FY24 due to higher coking coal price and hence lower FY24 EPS by 25%. Further, we roll over our valuation to mid-FY26, resulting in 7% increase in our target price to Rs 869, valuing at 6xFY25/FY26 average EV/EBITDA (Earlier: Rs 814 per share) and upgrade our rating to ADD (Earlier: Reduce)," said Centrum Broking.
ICICI Securities said, “Management retained its sales volume guidance of 25 mtpa for FY24 and reiterated its target of reaching 50mtpa capacity by FY30. Taking cognizance of additional volume from BPSL from end-FY24, we raise our FY25E EBITDA by 2%, resulting in a revised target price of Rs 775 on an unchanged 6.6x FY25E EBITDA. Maintain HOLD. Taking cognizance of Q2FY24 performance and additional volume of BPSL expansion in FY25, we raise FY25E EBITDA by 2%, resulting in a revised TP of INR 775 (earlier INR 755) on an unchanged 6.6x FY25E EBITDA.”
Motilal Oswal Securities said the stock’s current valuations at 5.9 times FY25 EV/EBitda and 2.1 times FY25E P/B fully price in the positives. It reiterated its 'Neutral' rating on the stock with a revised target price of Rs 780 from 740 earlier.
"We have marginally increased our FY24/25 Ebitda estimates by 5 per cent/3 per cent, driven by strong 2QFY24 performance, the commencement of operations at new iron ore and coal mines. However, these gains will be partially be offset by the rise in raw material costs and a more favorable outlook on domestic steel demand," Motilal Oswal said.
Brokerage Sharekhan said, “The company maintained FY24 steel sales volume guidance of 24mt and plans to expand steel production capacity to 37 mt/50 mt by FY25E/FY31E. Valuation of 7.7x FY25E EV/EBITDA seem rich to us and is factoring in expectation of margin/volume recovery. We do not find comfort in current valuations, given a premium to historical average EV/EBITDA of 6.7x and debt to remain elevated given capex plan. Hence, we maintain our Reduce rating on JSW Steel with an unchanged price target of Rs 700.”
In terms of technicals, the relative strength index (RSI) of JSW Steel stands at 35.8, signaling it's neither trading in the overbought nor in the oversold territory. The stock has a beta of 1.2, indicating high volatility in a year. Shares of JSW Steel are trading lower than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day but higher than the 200 day moving averages.
The JSW Group firm reported a consolidated profit of Rs 2,773 crore in the September quarter against a consolidated net loss of Rs 848 crore in the corresponding period a year ago. JSW Steel's consolidated net revenue rose 6.7% to Rs 44,584 crore in Q2 compared to Rs 41,778 crore in the year-ago quarter.
Consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at Rs 7,886 crore. The operating margin expanded by 1,350 basis points to 17.7% from 4.2% a year ago.
JSW Steel is among India's top six steel making companies and is a part of the $22 billion JSW Group.
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