Reduce JSW Steel - Result Update - Emkay

Reco: REDUCE JSW Steel
CMP: Rs 647
Target Price: Rs 590

Uncertainty looming large

Overall standalone performance remain in line, however, uncertainties remain on future volume. Topline stood at Rs 78.8 bn, up 36% YoY and 3% QoQ on higher volume of 1.9 mt.

EBITDA at Rs 12.5 bn fell 3% QoQ on higher RM costs with margin contracted by 104 bps to 15.9%. EBITDA/ tonne stood at Rs 6565 (US$129) lower QoQ though higher than estimates.

Despite a lower PBT on QoQ, reported PAT rose 32% QoQ to Rs 1.68 bn on account of Rs 1.4 bn tax credit. The company again suffered a forex MTM loss of Rs 5 bn due to weak INR.

Considering uncertainty on iron ore supply in Karnataka, Ispat's operations and current higher valuation we downgrade the stock to Reduce with a target price of Rs 590.

Source : Equity Bulls

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