Reduce JSW Steel; target of Rs 223: Prabhudas Lilladher

Prabhudas Lilladher's research report on JSW Steel

JSW Steel (JSTL) posted Q2FY21 EBITDA above our/consensus estimates by 6%/25% on the back of better than expected earnings in domestic ops. While overseas ops continued to drag earnings. Stock rallied sharply in last three months on the back of sharp uptick in steel prices, led by strong pent-up demand in China and severe shortage due to covid-19. Supplies have started to come back strongly as visible in increasing production levels. Chinese production at record levels would pose strong headwind to global prices. Hence, we believe that global prices have peaked out as visible in above mean spreads with continuous increase in global supplies.

Outlook

We maintain our negative outlook on the stock due to stretched valuations (EV/EBITDA of 7.6x FY22e), peaked out margins and overhang of Bhushan Power and Steel (BPSL) acquisition. We maintain Reduce with TP of Rs223 (earlier Rs185), EV/EBITDA of 6.5x FY22e.

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.

Read More