Target: ₹688

CMP: ₹733.65

JSW Steel (JSTL)’s reported in-line consolidated EBITDA of ₹4,550 crore (CentrumE: ₹4,590 crore), up 160 per cent q-o-q. It recorded standalone EBITDA at ₹4,030 crore, up 131 per cent q-o-q and EBITDA/t at ₹8,141/t, up 134 per cent q-o-q.

Adjusted to one-off expense like rupee depreciation and inventory losses, EBITDA stood at ₹4,890 crore and EBITDA/t of ₹9,891, up ₹6,414/t q-o-q; (CentrumE: EBITDA of ₹4,080 crore and EBITDA/t of ₹8,231).

The sequential growth is primarily on account of benefit from lower coking cost of ₹100/t (higher than guidance of USD80/t). The international subsidiaries reported positive EBITDA of ₹110 crore and domestic subsidiaries contributed ₹450 crore to consolidated EBITDA. We expect profitability to improve in Q4 due to rising steel prices.

Similarly, with international and domestic steel prices are on rise, we believe Q4 margins to further improve sequentially to ₹12,000/t. But despite margin recovery in sight, due to steep valuation we downgrade JSTL to Sell rating with target price of ₹688 (earlier: ₹667), valuing at 6.0x FY24/FY25 average EV/EBITDA. Lower coking coal price aided margin recovery; adj EBITDA/t increase to ₹9,891.

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