Buy JSW Steel; target of Rs 1377: Prabhudas Lilladher

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Volume growth: JSW Steel's consolidated volumes grew 15% YoY to 7.46mt, driven by a 35% YoY surge in exports and healthy demand from domestic automotive, renewable energy, and appliances segments.
  • Profitability: The company's EBITDA/t grew 27% YoY to INR 13,566/t, despite higher coking coal and other input costs, supported by lower mining premium and royalties.
  • Expansion pipeline: JSW Steel has a strong brownfield and greenfield expansion pipeline, with planned capacity additions of 25mtpa by FY31E, including the 5mtpa expansion at the BPSL unit under the JFE JV.
  • Raw material security: The company is improving its captive raw material security, with the development of domestic coking-coal resources and the acquisition of the MdR coking-coal deposit in Mozambique.

Thesis Validation Checklist

  • Volume growth: Monitor JSW Steel's ability to maintain strong volume growth, driven by the ramp-up of BF#3 and higher steel prices.
  • Profitability: Track the company's EBITDA/t, as higher coking coal costs are expected to constrain EBITDA/t expansion, but cost savings from the slurry pipeline and stronger volumes may support margins.
  • Expansion pipeline: Watch for progress on JSW Steel's expansion projects, including the 5mtpa expansion at BPSL and the development of the Mozambique coking-coal mine.
  • Raw material costs: Monitor coking coal and iron ore prices, as well as JSW Steel's ability to manage input costs and maintain its cost competitiveness.