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JSW Steel maintains sales and production guidance but with this exception

business | Jan 23, 2023 3:37 PM IST

JSW Steel maintains sales and production guidance but with this exception

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Jefferies has the second-lowest target on JSW Steel on the street at Rs 470.

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JSW Steel has maintained its full year guidance of 25 million tonnes in production and 24 million tonnes in sales. However, it has a caveat to the same.

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The management said that they have maintained guidance but with the exception of its Ohio operations and JSW Ispat Special Products, earlier known as Monnet Ispat.
In an interaction with CNBC-TV18, group CFO Seshagiri Rao said that there has been a slip in volumes in Ohio due to the prevalent conditions in the US. He also explained why JSW Ispat is excluded from the guidance:
"JSW Ispat Special Products we have taken certain maintenance shutdowns during last four to five months and that's why we were not able to achieve the guidance given."
JSW Steel lost nearly all of its bottomline in the December quarter, bearing the brunt of a high base and low commodity prices during the period.
On the operating front, the company's EBITDA as well as margin halved when compared to the same period last year. The company's operating performance was dented by higher expenses, which rose 20 percent year-on-year, and a 42 percent jump in finance costs.
Rao remains optimistic that for the March quarter, there will be a growth in volumes as export avenues re-open post the removal of duties. "There will be more exports in Q4. With that we will be able to do more volumes, and there will be definitely an improvement in the overall EBITDA margins in Q4 with higher volumes," he said.
The improvement in profitability, along with liquidation of inventory would mean a reduction in the company's debt, according to Rao.
Although JSW Steel's standalone EBITDA per tonne improved, Rao said that iron ore and coking costs remain higher. He also expects coking coal costs to remain flat in the March quarter.
Even as the company's earnings have improved, analysts have cited concerns over the company's valuation. At 8.2x financial year 2024 EV/EBITDA, CLSA called JSW Steel's stock expensive and maintained its sell rating with a price target of Rs 640.
Jefferies has the second-lowest target on JSW Steel on the street at Rs 470. Along with its underperform rating, it also cut the stock's financial year 2024-25 estimates by 11-13 percent.
ICICI Securities has also maintained its sell rating on the stock with a price target of Rs 550. The brokerage said that the company is more vulnerable to the steel cycle compared to peers owing to its higher degree of leverage.
Out of the 32 analysts that track JSW Steel, 19 of them have a "sell" recommendation, seven say "hold" while six have a "buy" recommendation.
Shares of JSW Steel ended 0.6 percent lower at Rs 736.90.
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