Analysts expect volumes & value-adds to drive growth at JSW Steel, offset debt – ET Infra


MUMBAI: Analysts have turned positive on JSW Steel after its latest quarterly earnings as they expect the benefits from likely growth in volumes and a higher proportion of value-added products to outweigh the impact of high debt on its books.

Several brokerages have raised earnings estimates and target prices on JSW shares to factor in the higher cash flows expected from an uptick in volumes and a more accretive product mix.

Currently the largest steelmaker in India with a production capacity of 27 million tonnes, JSW Steel is in the process of adding another 10 MT of production capacity by the end of FY25, which includes brownfield expansion at the Vijayanagar facility and Bhushan Power.

“On the one hand, volume growth in FY24/FY25E is likely to 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,” said ICICI Securities in a note, which views the risk-reward for the shares “balanced” at this stage.

Shares of the company closed at ₹702.70 on the NSE on Monday, up more than 1% from the previous close.

JSW Steel‘s consolidated net debt rose to ₹59,345 crore as of March-end from ₹56,650 crore a year ago with the net debt to equity ratio at 0.89 times, and the net debt to operating profit ratio at 3.20 times.

Even with a capital expenditure of ₹18,800 crore planned for the current financial year, the company sees its net gearing and leverage within the stated limits of 1.75 times and 3.75 times, respectively.

JSW Steel has guided for consolidated sales of 25 MT in FY24, a growth of nearly 12% compared to the previous fiscal.

A strong growth pipeline and increased focus on cost efficiency augur well for the company, JM Financial Institutional Equities said in a note , maintaining its ‘buy’ rating for the stock.

  • Published On May 23, 2023 at 07:36 AM IST

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