Reputed brokerage firm Motilal Oswal suggests investors to buy the stocks of JSW Steel, for a 19% upside, in 12 months. The lockdown norms have been relaxed and infrastructural demands are gaining in India. Hence, JSW Steel has a strong potential to recover its growth.
The Current Market Price (CMP) of JSW Steel, is Rs. 667. Motilal Oswal has estimated a Target Price for the stock at Rs. 790. The company is expected to offer a 19% upside, in 1 year.
|Current Market Price (CMP)||Rs. 667|
|Target Price||Rs. 790|
|1 year return||19.00%|
JSW's consolidated topline was up 10% QoQ to Rs. 380b, but EBITDA/PAT at Rs. 91b/Rs. 45b was down 12%/32% QoQ and 10%/16% lower v/s the firm's estimates. The miss was driven by continued cost pressure. Rising coking coal prices impacted margins negatively. Standalone sales volumes at 4mt were 11% lower than the firm's expectation due to delayed ramp-up at Dolvi (5mt expansion). EBITDA/t at the consolidated level stood at Rs. 19,724/t (up 48% YoY, down 18% QoQ). The weakness in margins to continue in 4QFY22 as coal prices continue to rise due to seasonal cyclones in Australia. However, Motilal Oswal expects coal prices to peak out in 4Q and anticipate an improvement in both steel demand and prices from 1QFY23.
Comments by Motilal Oswal
About the stock, Motilal Oswal stated, "The stock currently factors in EBITDA of less than Rs. 14,000/t, which we believe is fairly pessimistic. If China implements the stimulus package to boost the economy post the Winter Olympics, we believe steel demand prices would improve in India as well. The current tussle between JSW and the Indian Bureau of Mines (IBM) regarding average iron ore prices for the calculation of royalty, and JSW's stand to provision the premium basis the IBM prices despite contesting the same follow a prudent accounting principle."
About the company
The US$ 13 billion JSW Group is ranked among India's leading business houses. JSW's innovative and sustainable presence in various sectors including Steel, Energy, Infrastructure, Cement, Paints, Venture Capital and Sports is helping the Group play an important role in driving India's economic growth. JSW Group directly employs nearly 40,000 people. JSW held a 49% stake in BPSL before the conversion and now holds an 83.28% stake post the conversion. JSW operates three mines in Odisha, from where it serves its plants as well as sells on the merchant market. It also sells iron ore to group companies.
The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.