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JSTL’s Q4 EBITDA increased 42 percent quarter over quarter (+184 percent year over year), or 13 percent higher than JEFe, thanks to higher-than-expected realisations. Ebitda/t increased by 37% year on year to Rs 19.8K. Despite a recent correction, Asian steel prices remain strong; Indian spot HRC prices are 20% higher than the Q4 average and remain cheaper than imports. We expect JSTL’s margins to rise further in June-Q, but we expect them to level off in the second half of FY22. With a revised PT of Rs 820, we raise FY22-23e EPS by 44-68 percent and keep our Buy rating.
JSTL had a stellar fourth quarter, with Ebitda and net profit up 42-57 percent q-o-q (both 3x y-o-y) and 12-13 percent higher than JEFe. Standalone sales volumes increased by 4% q-o-q, while realisations increased by Rs 8.4K/t (+18%), owing to higher steel prices.
Due to higher iron ore prices, raw material costs increased q-o-q; nonetheless, Ebitda/t increased 37 percent q-o-q to Rs 19.8K, a decade high. The combined performance of subsidiaries improved year over year. Due to the BPSL acquisition, net debt increased by 2% year over year. JSTL’s Ebitda increased by 68 percent year over year in FY21, while net profit increased by 3 times.
Steel prices are strong: Domestic steel prices in China are down 15% from their mid-May peak, but are still up 27% year-to-date at $887/t. In the short term, the continuing Covid wave is impacting Indian steel demand, but JSTL anticipates exports to compensate for any shortage.
JSTL outlined an aggressive capex strategy with a total investment of Rs 475 billion over the next three years. This includes a Rs 150 billion expansion at Vijaynagar to increase capacity to 5 million tonnes per annum, suggesting a capacity cost of $400 per tonne. This, together with the previously planned 1 million tonnes per annum development at Vijaynagar, would bring JSTL’s total steel capacity to 33 million tonnes per annum by FY25.
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Hello, my name is Anuj Boruah. I am quite interested in writing about current events in business, finance, and the economy. I work as a newswriter at Reviewminute.
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