JSW Steel Q2 results beat market estimates. Here're fresh share price targets

JSW Steel Ltd reported better-than-expected September quarter results, with revenue growth at 3.8 per cent YoY coming in above analyst estimates, thanks to higher volumes that offset lower realisation. JSW Steel's Ebitda, analysts said, also beat estimates die to lower coking coal costs and reduction in iron ore royalty premium on account of lower captive ore production. Net debt, though, increased sequentially. Post Q2 results, analysts are largely positive on JSW Steel but cite rich valuations that leaves little upside potential for the stock.

Antique Stock Broking has 'Hold' rating on the stock with a target of Rs 763, as it believes the stock’s valuation is rich and JSW's debt levels are high. "We await better entry levels," the brokerage said. The scrip, which is up 19 per cent in the last one year, closed at Rs 770 on Friday.

The domestic steel demand is expected to grow 8–10 per cent annually led by strong capex on infrastructure, defence indigenisation and energy transition. Analysts said the 5 mtpa Vijaynagar brownfield expansion and BPSL phase 2 expansion (1.5 mtpa) are expected to be completed by FY24, with incremental volumes coming in FY25 onwards.

Motilal Oswal Securities said the stock current valuations at 5.9 times FY25 EV/EBitda and 2.1 times FY25E P/B fully price in the positives. It has reiterated its 'Neutral' rating on the stock with a revised target price of Rs 780 from 740 earlier.

"We have marginally increased our FY24/25 Ebitda estimates by 5 per cent/3 per cent, driven by strong 2QFY24 performance, the commencement of operations at new iron ore and coal mines. However, these gains will be partially be offset by the rise in raw material costs and a more favorable outlook on domestic steel demand," Motilal Oswal said.

Nuvama Institutional Equities said JSW Steel is on a growth path with 6.5 mtpa capacity that will be commissioned by end-FY24, leading to a 9 per cent volume CAGR over FY23–26. It edged up its FY24/FY25 EBitda estimates by 1–3 per cent to factor in higher prices and volumes.

"This along with a rollover and valuation of 7.5 times FY25E/FY26E average yields a fair value of Rs 818 (earlier Rs 755). All in all, upgrade to ‘HOLD’," it said.

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