Buy JSW Steel; target of Rs 295: ICICI Direct

ICICI Direct's research report on JSW STEEL

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.

JSW Steel reported healthy volumes of 3.9 million tonne (MT) for the quarter, up 2% YoY, 12% QoQ. The performance was, however, subdued on the operational performance front on account of lower-thananticipated realisation. Going forward, we expect realisations to increase in the backdrop of firming up of domestic steel prices. Going forward, we model EBITDA/tonne of Rs. 8000/tonne for FY18E (downward revised from Rs. 8250/tonne earlier) and Rs. 9000/tonne for FY19E (upward revised from | 8500/tonne earlier). We value the stock on an SOTP basis, assigning 6.5x FY19E EV/EBITDA for the core and factoring CWIP till FY19E in our valuations at 0.8x book. Thus, we arrive at a target price of Rs. 295. We maintain our BUY recommendation on the stock.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.