JSW Steel Q4 Results Review - Improved Show, But Leverage Never Sleeps: ICICI Securities

JSW Steel’s (JSTL) Q4FY23 EBITDA surpassed consensus estimates. Key points: 1) consolidated EBITDA surged 75% QoQ to Rs.79.4bn (down 14% YoY) owing to positive price-cost effect, mainly at standalone operations; 2) both shipments and EBITDA/te at the standalone level were ahead of estimates; 3) performance of all the subsidiaries improved; 4) gross debt was down by just Rs6.1bn QoQ to Rs800.6bn. Going ahead, management expects combined sales volumes at 25mnte for FY24 (FY23: 22.8mnte) and coking benefits to flow in from Q2FY24. In our view, the risk-reward in JSTL stock is balanced at this stage. On one hand, volume growth in FY24E/FY25E is likely stay ahead of peers and, on the other, debt remains high and is unlikely to come off in light of the company’s capital commitments. That said, the stock price has corrected and is trading near its 10- year historical mean EV/EBITDA. We introduce FY25E numbers at this stage and roll over to FY25E valuations. Our revised target price is Rs675 (earlier: Rs550) on an unchanged multiple of 6.2x FY25E EBITDA. Upgrade to HOLD (from Sell).

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