Reliance Securities recommended hold rating on JSW Steel with a target price of Rs 282 in its research report dated November 01, 2017.
Reliance Securities's research report on JSW Steel
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 front. Adjusted PAT surged by 26% YoY (+102% QoQ) to Rs8.45bn vs. our estimate of Rs7.43bn, largely due to higher-than-estimated other income and lower depreciation cost. Looking ahead, we expect JSTL’s EBITDA/tonne to improve owing to higher steel prices and stable input cost.
OutlookHence, we maintain our HOLD recommendation on the stock with a revised SOTPbased Target Price of Rs282 (from Rs221 earlier).
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