PL First Cut - JSW Steel 2QFY24

JSW Steel (JSTL IN, CMP Rs 770, MCap Rs 1.88 tn, BUY) 2QFY24 results: Beats est.; lower RM prices drive EBITDA/t 30% QoQ to Rs12,750; Cons. EBITDA dragged by overseas subs.

- JSTL’s Standalone revenue increased 2% QoQ to Rs 332 bn. Average Realization declined 6.2% QoQ to Rs 62,362 (down 4% YoY; lower than PLe of Rs64k/t) as steel prices were on a downward trend.

- Sales volume increased 10% QoQ to 5.41 mt (up 8% YoY; better than PLe of 5.3mt).

- Standalone EBITDA grew robust 42% QoQ to Rs 68.9 bn (up 4x YoY on lower base & lower coking coal costs; better than PLe of Rs 62b) on lower raw material, power & fuel and other costs.

- EBITDA per ton improved by Rs2,890/t QoQ to Rs 12,750 (better than PLe of Rs11,605/t).

- RM cost per ton was declined 7% QoQ; P&F cost per ton declined 10% QoQ while Mining premium also declined 43% QoQ to Rs 3357/t.

- Consolidated EBITDA increased 12% QoQ to Rs 78.8 bn (up 4.5x YoY) better than PLe of Rs 76 bn; but affected by overseas operations.

- US subsidiary (Ohio) performance was poor led by sharp 15% decline in realization to USD754/t; EBITDA loss at USD168/t. Italy ops realization was down 12% QoQ while EBITDA declined 52% QoQ to Euro 9m.

- Realization at BPSL declined sharper affecting EBITDA/t QoQ -10% to Rs9,313. Coated products continued to do well with 6% QoQ EBITDA growth to Rs 4.1 bn.

- View: JSTL’s 1HFY24 performance is robust on lower coking coal and strong volume growth, however going forward margins are expected to come under pressure from 4QFY24 as coking coal prices again jumped to USD367/t in last one month. JSTL is well placed to capitalize on strong volume growth in domestic markets over next two years given its brownfield expansion at Vijayanagar. We will update post concall which is scheduled today at 5.30PM. Maintain BUY with TP of Rs926.