Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

JSW Steel - Start of EBITDA contraction cycle - ICICI Securities

Posted On: 2021-10-24 15:35:57 (Time Zone: IST)

Majority of the discussion in the Q2FY22 results conference call of JSW Steel (JSWS) revolved around quarterly increase in coking coal price to come through and the levers management has to counter the same. Coking coal prices at US$400/te has started the EBITDA correction cycle after 5 quarters of upcycle (starting from Q1FY21). We expect the cycle to play out over the next 4-5 quarters. Q2FY22 print (standalone) was inline at EBITDA (EBITDA/te at Rs22944/te was down Rs3346/te QoQ), while higher other income led to beat in PAT. Overseas business as well as JSW Coated has witnessed significant traction in the quarter with ~Rs17.4bn of subsidiary EBITDA (vis--vis ~Rs7bn QoQ) driving consolidated EBITDA beat. Bhushan Power (BPSL) surprised our estimates with a Rs20bn Q2FY22 EBITDA (EBITDA/te at Rs26,605/te). We downgrade JSWS to REDUCE from HOLD with a revised target of Rs625/share (1.7x FY24E P/B).

  • India capacity moving towards 33mtpa. 5mtpa Dolvi expansion has commenced operations. Project to increase steel-making capacity by 5mtpa at Vijayanagar from the existing 12mtpa is also underway. Total estimated capex is Rs150bn. Expansion is expected to be completed by FY24. Management expects to leverage existing facilities at Vijayanagar i.e surplus pellets, sinter, coke making facilities at existing operations to meet the key raw material requirements. There are also plans for expansion at Vijayanagar of existing facilities to enhance capacity by further 2.5mtpa (1+1.5) in phases. Organic brownfield capacity expansion capex well below global benchmarks of replacement cost of ~US$1,000/te for BF-based capacity. Further management announced ~ Rs30bn capex for expanding BPSL capacity from 2.6mtpa to 5mtpa. With 15mtpa capacity coming on-stream in next three years, management appears confident of suitable placement of the same.
  • Subsidiary EBITDA witnessed a significant turnaround in Q2FY22, driving the consolidated beat. Meaningful beat was witnessed in JSW Coated with EBITDA/te reaching an all-time high of Rs14,743/te (up Rs986/te QoQ, we were expecting a moderation in profitability). US reported an EBITDA of US$13.16mn (EBITDA/te declined QoQ). Ohio operations has seen a meaningful turnaround with Q2FY22 EBITDA of US$48mn (up 2.5x QoQ). Management still underlines scope of further improvement in Ohio's profitability. Improvement is also witnessed in operating performance of Piombino (Italy) with EBITDA at 6.1mn against (4.6mn) QoQ. Global operations, combined reported an EBITDA of Rs5bn against Rs2.8bn QoQ.
  • Downgrade to REDUCE. We have consolidated BPSL financials into JSWS financials. The completion of the upstream and downstream capex can help improve the throughcycle EBITDA and RoE profile. This should manifest in the next downturn. This explains our high 1.7x P/B (FY24E) multiple. Our downgrade reflects our view on the steel cycle.

Shares of JSW Steel Limited was last trading in BSE at Rs. 667.90 as compared to the previous close of Rs. 673.45. The total number of shares traded during the day was 321457 in over 7622 trades.

The stock hit an intraday high of Rs. 690.45 and intraday low of 658.30. The net turnover during the day was Rs. 215286456.00.

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Mutual Fund Review - November, 2021 - ICICI Direct

Maintain SELL on Asian Paints - Demand rebound strong; profitability cut steeper - HDFC Securities

Mphasis - 2QFY22 Result Update - Growth Resiliency Continues; Raise Target Price - Reliance Research

Gateway Distriparks - Rail continues to drive earnings - ICICI Securities

Shoppers Stop - Beneficiary of faster than expected recovery - ICICI Securities

Asian Paints - Q2FY22 Result Update - ICICI Securities

TVS Motor Company - EVs now at the center of its global ambitions - ICICI Securities

Havells India - Strong demand across regions; profitability likely to be muted in H2FY22 - ICICI Securities

Tata Communications - Rising visibility on revenue growth - ICICI Securities

Angel Broking - Business momentum intact for strong earnings growth - ICICI Securities

Q2FY22 Result Update - Rallis India - ICICI Direct

Q2FY22 Result Update - Navin Fluorine - ICICI Direct

Q2FY22 Result Update - Shoppers Stop - ICICI Direct

Company Update - Mastek Ltd - ICICI Direct

Q2FY22 Result Update - JSW Steel - ICICI Direct

Q2FY22 Result Update - VST Industries - ICICI Direct

HDFC Life Insurance - Q2FY22 First Cut - ICICI Direct

Federal Bank - Q2FY22 First Cut - ICICI Direct

Company Update - Taj GVK Hotels - ICICI Direct

Q2FY22 Result Update - Indian Hotels - ICICI Direct

Inox Leisure - Q2FY22 First Cut - ICICI Direct

Supreme Industries - Q2FY22 First Cut - ICICI Direct

Q2FY22 Result Update - Biocon Ltd - ICICI Direct

PVR Ltd - Q2FY22 First Cut - ICICI Direct

Q2FY22 Result Update - Asian Paints - ICICI Direct

Quant Pick - RBL Bank - ICICI Direct

Q2FY22 Result Update - IIFL Securities - ICICI Direct

Q2FY22 Company Update - Bank of Baroda - ICICI Direct

Q2FY22 Result Update - Syngene International - ICICI Direct

Company Update - Sonata Software - ICICI Direct

Q2FY22 Result Update - Gateway Distriparks - ICICI Direct

Q2FY22 Result Update - Tata Communications - ICICI Direct

Q2FY22 Result Update - Havells India - ICICI Direct

Mphasis - 2QFY22 Result Update - Growth Resiliency Continues; Raise Target Price - Reliance Research

Maintain ADD on Havells India - Outperformance continues; miss on margin - HDFC Securities

Indraprastha Gas - Company Update - EV vs CNG; TCO Economics Favour CNG - Reliance Research

FinTech Playbook - Discount Brokers - 'Nudging' the long tail of standalone brokers - HDFC Securities

Tata Communication - Revenue growth remains muted - YES Securities

Havells India Ltd - Q2FY22 Result Update - YES Securities

ICICI Lombard General Insurance - Q2FY22 Result Update - YES Securities

Syngene International Ltd - Lack of near term triggers - YES Securities

Mphasis - Q2FY22 First Cut - YES Securities

IndiaMART InterMESH - Q2FY22 First Cut - YES Securities

Sterlite Technologies - Q2FY22 First Cut - YES Securities

Can Fin Homes - Q2FY22 First Cut - YES Securities

Havells India - 2QFY22 Result Update - Strong Revenue Growth; Higher Commodity Prices Impact Earnings - Reliance Research

TVS Motor - 2QFY22 Result Update - Healthy Exports Coupled with New Launches to Aid Higher Margins - Reliance Research

Maintain SELL on Jubilant FoodWorks - No big fireworks unlike in other discretionary names - HDFC Securities

Sonata Software - Strong execution - HDFC Securities

Navin Fluorine International - Muted performance - HDFC Securities

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020