Last updated: 22 Oct, 2021 | 09:52 am
Increase in revenue: JSW Steel has reported consolidated revenue of Rs 32,503 crore in the Jul-Sep 21 period, up by 12.5% from last quarter. Analysts had earlier estimated revenue of Rs 32,108.6 crore. The increase in revenue was led by product and market mix. For Q2FY21, the company's revenue was Rs 19,264 crore.
Profit beat estimates: JSW Steel reported a net profit of Rs 7,170 crore, an increase of 21.4% quarter-on-quarter. Analysts has earlier predicted a net profit of Rs 5,744.2 crore. The profit was aided by favourable realisations.
Increase in Operating Profit: The company's operating profit increased to Rs 10,417 crore, up by 1.4% sequentially. The analyst has earlier estimated operating profits of Rs 10,452 crore. The increase in operating profit was on the back of reliance on exports and stable volumes and higher realizations.
EBITDA Margin - The EBITDA margin contracted from 35.5% to 32% Q-o-Q. The EBITDA margin was lower compared to the previous quarter because of the increase in raw material prices of coking coal, iron ore, and other key inputs like natural gas, power, and ferroalloys.
EBITDA of Overseas units - The company's Ohio unit reported operating profit of $48.3 million, US plate and pipe mill reported operating profit of $13.16 million, and Italy arm reported EBITDA profit at 6.1 million Euros.
Sales Update - The company sales increased by 4.8% to 3.79 million tonnes sequentially. The domestic sales were up by 4% Q-o-Q and exports increased by 22%. The domestic automotive sales rose by 9% in the quarter ending September over the quarter ending June.
Other updates - JSW Steel spent Rs 3,639 crore on capital expenditure as against the total planned Capex spending of Rs 18,240 crore for the current financial year. The Net Debt to Equity ratio stood at 0.92X for Q2FY22.
The company expects slowing demand from China but sees growth for the rest of the world. The demand in India is expected to increase led by the infrastructure and construction sectors.
The company plans to absorb additional cost pressure of $100 a ton in Q3FY22. The Iron Ore prices are currently available at a 10-15% discount and are expected to head further south due to reduced demand from China.
JSW Steel results: review
JSW Steel has reported a decent set of numbers for the Jul-Sep 21 period, aided by strong revenue growth. However, rising input costs has weighed on the margins as well as the operating performance. Going forward, there are increased risks to raw material prices due to higher cooking coal prices in the the second half.
JSW Steel earnings: Brokerage outlook
Global brokerage firm Credit Suisse has maintained an ‘underperform’ rating on JSW Steel with a target price of Rs 550. The research house noted that while JSW Steel’s standalone earnings missed estimates, higher earnings globally helped the company to offset poor domestic performance.
JP Morgan has maintained a ‘Neutral’ rating on the stock with a target price of Rs 730. The research firm expects steel price hikes in November and December and also lower iron ore costs in the second half of the year. JP Morgan noted that the margins for Steel companies have peaked and hence there are upside risks to estimates.