JSW Steel joins ₹1 trillion m-cap club


JSW Steel Ltd on Monday joined the elite 1 trillion market capitalisation club after its shares hit a fresh 52-week high on the BSE.

The scrip opened at 405.00 apiece on the BSE and further gained grounds to touch an all-time high of 418.95. The shares settled at 417.35 apiece, up 3.75% from its previous close. The company’s market capitalisation stood at 1.01 trillion at the end of the session.

JSW Steel’s share price has surged over 200% from its March low.

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JSW Steel reported 21,859 crore consolidated revenue in Q3, up 21% from 18,055 crore in the same quarter of the previous fiscal. Net profit during December quarter stood at 2681 crore versus 211 crore a year ago. Operating profit jumped 2.5 times to 5,946 crore while ebitda margin in Q3FY21 expanded to 27.2% from 13.5% in Q3FY20.

The better-than-expected earnings was led by rising steel prices and higher output.

“The stock trades at 5.9x our revised FY22E EV/EBITDA. We value the stock at 6.5x FY22E EV/EBITDA. With the steel cycle on an upswing, volume growth at Dolvi and downstream projects commissioning in the next six months, we believe that there is an upside risk to our estimate”, Brokerage firm Emkay Research in its 25 January report.

According to Brokerage firm Sharekhan, commissioning of Dolvi and downstream projects will expand JSW Steel’s earnings and will grow by 20% CAGR over FY2021E-FY2023E with improvement in RoE to 15-15.6% (versus 10.5% in FY2020).

“We like JSW Steel given its strong project pipeline and cost reduction initiatives, which should support margin. Over FY21-23E, we expect above industry 16% CAGR in volume, led by Dolvi expansion. Any turnaround in its loss-making overseas operations could provide a further upside”, said Motilal Oswal in its 25 January report.

Management indicated that domestic steel prices are expected to remain range bound in the near term and could moderate as long steel products have witnessed price correction recently due to improved supply.

However, management also highlighted that JSW Steel could take price hike for automotive customers in two phases (once in January and then in April), which would help blended realisation in fourth quarter of fiscal year 2021 to some extent. Management expects domestic steel demand to grow by 10%-12% in FY2022, led by strong demand by automotive, housing, and infrastructure sectors.

Earlier Business Standard reported that the firm planning to raise $1 billion to fund its acquisition of Bhushan Power and Steel and refinance old loans. Talks are currently focused on the structure of the offering and seeking necessary approvals from the Reserve Bank of India (RBI). The issue will be launched as early as this month”, the report added.

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