Steel maker JSW Steel's Q3 results, announced on January 24, 2025, after market hours, failed to meet Street expectations.
The company reported a consolidated net profit attributable to the owners of Rs 717 crore in Q3FY25, reflecting a 70.3 per cent decline Y-o-Y, compared to Rs 2,415 crore in Q3FY24.
Revenue dropped 1.3 per cent Y-o-Y to Rs 41,378 crore in Q3FY25, from Rs 41,940 crore in Q3FY24. Both revenue and profit missed Bloomberg estimates by 1 per cent and 3 per cent, respectively.
On the operating front, earnings before interest, tax, depreciation, and amortisation (Ebitda) declined 22.3 per cent Y-o-Y to Rs 5,579 crore, from Rs 7,180 crore in Q3FY24.
Therefore, the Ebitda margin contracted 360 bps Y-o-Y to 13.5 per cent, as compared to 17.1 per cent in Q3FY24.
The consolidated crude steel production for the quarter stood at 7.03 million tonnes, an increase of 2 per cent Y-o-Y and 4 per cent Q-o-Q.
The steel sales for the period totaled 6.71 million tonnes, reflecting a 12 per cent Y-o-Y and 10 per cent Q-o-Q growth.
Meanwhile, crude steel production at the Indian operations for Q3FY25 came in at 6.82 million tonnes, up 3 per cent Y-o-Y and Q-o-Q.
Steel sales for the quarter were 6.54 million tonnes, increasing 12 per cent Y-o-Y and 10 per cent Q-o-Q.
Notably, the domestic sales during the quarter hit a record high of 5.99 million tonnes, growing 8 per cent Q-o-Q and 14 per cent Y-o-Y, driven by strong institutional and retail demand.
A recovery in government capex is expected to aid growth in Q4, culminating in approximately 10 per cent growth for the fiscal year.
Steel imports remained elevated in Q3, even though it declined 10.8 per cent Q-o-Q to 2.83mt.
However, for 9M FY25, imports increased 16.7 per cent Y-o-Y to 8.21 mt.
Exports in Q3 grew 44 per cent Q-o-Q to 1.82mt, while exports for 9M FY25 fell 16.5 per cent to 4.58mt.
Consequently, India remained a net importer of steel in Q3 as well for 9M FY25.
To address rising steel imports, the Director General of Trade Remedies (DGTR) has initiated trade Investigations including safeguard and anti-dumping probes which are ongoing, JSW Seel said.
On the bourses, JSW Steel share price dropped as much as 3.58 per cent to hit an intraday low of Rs 898.90 per share.
Here’s what brokerage said about JSW Steel Q3 results:
Nuvama
Nuvama highlighted that JSW Steel's Q3FY25 standalone Ebitda of Rs 4,390 crore, which fell 5 per cent Q-o-Q, was better-than-expected, supported by a smaller-than-anticipated decline in steel prices.
The Ebitda per tonne stood at Rs 7,866, down Rs 891 per tonne from the previous quarter.
Softer steel prices and higher iron ore costs were partially offset by higher volumes and a decrease in coking coal costs.
Indian operations reported a flat Q-o-Q adjusted Ebitda of Rs 5,490 crore, while the overseas subsidiary continued to post losses.
Looking ahead, Nuvama expects a Q4FY25E Ebitda per tonne increase of Rs 1,500-2,000, driven by lower raw material costs, rising steel volumes, and slightly higher steel prices.
Despite this, analysts have lowered their FY25E and FY26E Ebitda estimates by 4 per cent and 7 per cent, respectively, factoring in weaker prices.
As a result, they have maintained a target price of Rs 821, valuing the stock at 8x EV/Ebitda, and retained their ‘Reduce’ rating.
JM Financial
JM Financial reported that JSW Steel’s Q3 consolidated Ebitda of Rs 5,500 crore was in-line with expectations of Rs 5,400 crore.
The Ebitda per tonne decreased by around Rs 0.8k Q-o-Q to Rs 7.8k, primarily due to lower steel realisations.
On the earnings call, the company noted that it expects coking coal consumption costs to decrease by$10-15 in Q4FY25, with margins improving due to the ramp-up of the JVML facility and lower raw material costs.
Additionally, JSW Steel plans to increase its effective capacity from 9 to 11 million tonnes in Karnataka.
The recovery in government capex in Q4, along with anticipated tariffs on steel imports, is expected to support steel demand. With a strong growth pipeline and a focus on cost efficiency, JM Financial maintains a 'Buy' rating.
The brokerage, however, has upped the target price to Rs 1,160 from Rs 1,130 earlier.
Global brokerages
Nomura
Nomura noted a Q3FY25 consolidated Ebitda of Rs 5,580 crore, which exceeded consensus estimates by 6 per cent, was primarily driven by lower-than-expected operating costs.
However, the company’s reported Ebitda fell short of its expectations due to lower steel realisations than anticipated.
The blended steel realisation saw a 4.7 per cent decline Q-o-Q, coming in 3 per cent below Nomura’s forecast.
The management also highlighted that coking coal costs had reduced by $34/t, surpassing their initial guidance.
Despite this, the reported Ebitda per tonne of Rs 8,314/t declined by 6 per cent Q-o-Q, falling 13 per cent short of its estimate.
Looking ahead, analysts have adjusted FY25F/26F/27F consolidated Ebitda forecasts downward by 8 per cent, with new estimates of Rs 24,400 crore, Rs 43,500 crore, and Rs 45,400 crore respectively, reflecting lower projected volumes and steel prices.
The revised FY26F/27F Ebitda forecasts remain 10 per cent above Bloomberg consensus, while FY25F Ebitda is now 10 per cent below consensus.
“We reaffirm our ‘Buy’ rating and our target price (TP) of Rs 1,220, as we roll forward our valuation to FY27F.
"Our TP is based on 7.6x one-year-forward EV/Ebitda (unchanged),” Nomura said, in a note.
Morgan Stanley, Citi, Investec
Citi has reportedly maintained a 'Sell' rating on the stock, with a target price of Rs 715, up from Rs 700. In contrast, Morgan Stanley has maintained an ‘Overweight’ rating with a target of Rs 1,150, and Investec continues to rate the stock as ‘Buy’, with a target price of Rs 1,100.
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