JSW Steel shares rise 28% from 52-week low; what should investors do?

Shares of JSW Steel have gained 28 per cent from their 52-week low amid highly volatile domestic market. The stock of the JSW Group firm, hit a 52-week low of Rs 520.10 on May 26, 2022. It is currently trading at Rs 665.10, translating into a rise of 28 per cent in less than three months.

On July 22 this year, JSW Steel's consolidated net profit plunged 85.8 per cent year-on-year for the quarter ended June 30. Profit came at Rs 838 crore on affected by adverse impact of falling global prices and levying of 15 per cent duty on steel exports.

Net profit for the quarter ended June 2021 stood at Rs 5,904 crore in the year-ago period. Sequentially, profit slumped 74.4 per cent from Rs 3,234 crore in the March 2022 quarter.

However, revenue from operations rose 31.7 per cent to Rs 38,086 crore in June 2022 quarter in comparison with Rs 28,432 crore in the last year period.

JSW Steel Q1 results: Net profit plunges 86% YoY to Rs 838 cr on steel export duty

Brokerages on Q1 show

Centrum Broking cut its target price after Q1 earnings.

"JSW Steel cut its FY23 capex guidance to Rs 15,000 crore from Rs 20,000 crore earlier, indicating the pressure arriving due to lower profitability. We marginally tweak our earnings (cut FY23/FY24 EBITDA by 1.4%/1.6%) to factor in lower profits of its  subsidiaries. With a fall in  earnings, we  cut our  target price to Rs 613  (earlier Rs 623), valuing at 6 times FY24E EV/EBITDA. Recommend ADD, "said the brokerage.

Motilal Oswal has assigned a neutral rating to JSW Steel.

"We expect another round of correction in steel prices in the near term as steel industry may look at flushing out the excess inventory from the system before making a case for any hike. The seasonally weak quarter due to the monsoons also supports our expectation of further price correction. We raise our FY23 EBITDA estimate marginally by 4 per cent to reflect the sharp correction in input costs that would offset steel price correction. We retain our Neutral rating with a revised target price of Rs 565 (v/s Rs 525), based on 6x FY23E EV/EBITDA. Stimulus in China will be a key upside trigger for the stock," the financial services firm said.

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Stock movement today  

The stock was trading flat today even as JSW Steel reported a 14 per cent year-on-year growth in its crude steel output to 15.69 lakh tonne (LT) in July 2022.

The company had produced 13.82 LT crude steel in July 2021. The production of flat rolled products rose 15 per cent to 10.72 LT in July 2022, from 9.34 LT in the same month last year.

JSW Steel shares were trading at Rs 666.35 against the previous close of Rs 669.05 on BSE.

The stock has fallen after 11 days of consecutive gain. In a month, the stock has gained 18 per cent. It hit a 52-week high of Rs 789.95 against the previous close of Rs 669.05 on BSE.

Total 0.27 lakh shares of the firm changed hands amounting to a turnover of Rs 1.79 crore on BSE. The market cap of the firm stood at Rs 1.61 lakh crore on BSE.

JSW Steel Stock Outlook

Here's a look at what analysts said on the outlook of the stock post rally from its 52-week low.

Ravi Singh, vice president and head of research, Share India

"The company plans to expand its production capacity in the country. The stock price of the company is in consolidation zone after some rally. The surge in volumes and accumulation mode may push the stock further up to the levels of Rs 690 in the coming trading sessions."

Manoj Dalmia, founder and director, Proficient Equities Private Limited

"JSW Steel has given about 28 per cent returns from its recent low. It can face some retracement to Rs 639 levels or might continue its upmove depending on closing below Rs 656. No extra price for supply to Europe despite New Delhi's imposition of taxation on export, decrease in coking coal prices and increase in steel prices are some reasons behind the stock hike. Investors can start accumulating at dips. We can see some short-term price moves due to overall good quarters for companies."

Pavitraa Shetty, Co-founder & Trainer, Tips2Trades

"Despite below average results in Q1FY23 earnings, strong capex plans, rally in global equity led by fall in crude oil prices and lower inflation expectations have led to a good recovery in JSW Steel stock. Currently, the stock is very overbought and investors are advised to book profits and wait for a dip near Rs 600 to initiate fresh buy positions."

Tirthankar Das, Head of Technical Research, Ashika Group

"The stock has been witnessing upward momentum since 1.5 months forming higher high low on daily and weekly chart indicating continued positive momentum. It has generated a breakout above the last eight weeks range RS 540- Rs 590 signaling resumption of up move and offers fresh entry opportunity. Buying demand is seen emerging in the stock after a base formation around the major support area of Rs 550 levels, being the confluence of the 100WMA (currently at Rs 580) and the 38.2% retracement of the major rally since March 2020 ( Rs 132- Rs 790). On the oscillators front, the weekly stochastic has rebounded and has recently generated a buy signal moving above its three periods average thus validates positive bias. Hence, it can be expected that the stock to maintain positive bias and head initially towards Rs 730 being the 78.2% retracement of the April-May 2022 decline (Rs 790- Rs 520) followed by Rs 800 in the near term."

About JSW Steel

The company is engaged in the business of production and distribution of iron and steel products. Its product portfolio in flat and long steel products includes hot rolled coils, sheets and plates; cold rolled coils and sheets; galvanized and galvalume products; tinplate's; non-grain oriented electrical steel; pre-painted galvanized and galvalume products; thermo-mechanically treated (TMT) bars; wire rods; rails; grinding balls, and special steel bars.