JSW Steel Ltd. share price target

Captive iron ore mines to reduce cost: JSW has won 5 iron ore mines in category C auctions, which can produce about 5 mnt of iron ore. Currently, the company has applied in Supreme Court for removal of 30 mnt cap on Karnataka iron ore production.

Rich valuations shape our NEUTRAL rating (TP Rs 242, 7.0x Sep-19 EV/EBITDA) JSW Steels (JSTL) standalone numbers missed estimates (EBITDA/t: Rs 7,467, (19.5)/18.9% YoY/QoQ), Est 7,924) on weaker realisations (Rs 37,806/t, 16.9/(3.5)% YoY/QoQ, Est Rs 39,029). Volumes continued to be strong (3.92 mT, 12.0% YoY), as JSTL sold from its inventory, offsetting flattish production volumes.

JSW Steel (JSTL) has delivered an in-line performance in 2QFY18 with its standalone sales volume increasing by 2% YoY and 11.7% QoQ to 3.92mnT vs. our estimate of 3.95 mnT. Notably, JSTL recorded the highest 2Q sales volume. However, NSR fell by 3.2% QoQ to Rs38,153/tonne vs. our estimate of Rs40,879/tonne, which the Management attributed to lower realisation in coated business led by pressure from cheaper imports. EBITDA surged by 33.2% QoQ (+7.7% YoY) to Rs29.3bn vs. our estimate of Rs29.6bn, while EBITDA/tonne grew by a healthy 19.2% QoQ (+5.5% YoY) to Rs7,467 vs. our estimate Rs7,500. EBITDA margin expanded by 369bps QoQ (-264bps YoY) to 19.6% owing to lower overall operational cost especially on raw material...

For Q2FY18, JSW Steel reported a subdued performance on the operational front. The topline was above our estimates on account of higher sales volume while profitability was below our estimates. Standalone operations reported a muted EBIDTA/tonne on account of lower-than-anticipated sales realisations Sales volume for the quarter came in at 3.92 million tonnes (MT), up 2.1% YoY, 11.7% QoQ, higher than our estimate of 3.6 MT. The consolidated topline for the quarter was at | 16818 crore (up 27.1%...

Iron ore mining and logistics benefits ahead JSW Steel's (JSTL) 2QFY18 consol. EBITDA grew 16% QoQ/3% YoY to INR30.4b (6% miss). Standalone EBITDA per ton grew 19% QoQ to INR7,467 (est. of INR7,655). Consol. PAT grew 34% QoQ/15% YoY to INR8.4b (est. of INR11.6b, miss due to a higher tax rate). Net debt (incl. acceptances) increased by INR10b to INR526b. Sales grew 12% QoQ to 3.92mt on destocking after the build-up due to GST in 1Q. Production was muted with just 1% QoQ increase to 3.94mt due to iron ore and water shortages. These issues are now behind....

Q1FY18 consolidated EBITDA was down 20% YoY at Rs 26 bn, in line with our estimate but marginally higher than consensus. EBITDA decline was mainly due to (1) subdued domestic sales due to industry-wide destocking on GST implementation and (2) YoY higher raw material cost.

We will largely maintain our estimates and recommendations (NEUTRAL with a TP of Rs 236 based on 7x June 19 EBITDA). JSW Steels (JSTL) standalone numbers missed estimates (EBITDA/t: Rs 5,917/t, -33.8% YoY, -15.0% QoQ, Est 6,728) on weaker sales volumes (3.5 mT, 4.8% YoY, -11.6% QoQ, Est 3.9 mT). Realisations beat estimates (Rs 39,171, 21.1% YoY, flat QoQ, Es Rs 38,100), driven by lower exports (23% vs est 30%) in the mix (Export prices fell more than domestic). Subsidiaries delivered strong numbers (Coated products EBITDA up 30.3/27.0% YoY/QoQ, US/Chile +ve EBITDA from losses earlier), and this drove a smaller miss on consolidated EBITDA (Rs 26.2bn, -20.0% YoY, -17.3% QoQ, Est Rs 27.8bn).

topline for the quarter was at | 15977 crore. After adjusting for excise duty, net operating income (consolidated) was at | 14699 crore (up Quarterly Performance (Consolidated)...

We expect JSTL's margins to inch up, going forward as the steel prices continue to remain strong in global steel markets driven by a surprise demand spurt in China. Moreover, the steel demand in domestic markets appears to be strong, which would drive the domestic steel prices further. Despite these positives, the valuations seem to be prohibitive especially following the sharp run-up in the stock price. However, we believe that JSTL continues to be the best bet on domestic steel space due to efficient operations and lean cost structure. Thus, we...

JSW Steel Ltd. (JSW Steel), a part of USD 11bn JWS group is one of the leading steel manufacturer in India with an installed capacity of 18mn tonnes. The company has a wide product range covering the entire flat and long steel. JSW...