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EBITDA/tonne of steel companies likely to move north in Q4FY23 - Metal Preview

ICICIdirect Research 14 Apr 2023 DISCLAIMER

What's Buzzing 

After witnessing a QoQ increase in EBITDA/tonne in Q3FY23, EBITDA/tonne steel companies is likely to further expand in Q4FY23E. 

Context 

For Q4FY23E, on a QoQ basis, steel companies within our coverage universe are likely to report a sequential increase in EBITDA/tonne of ~Rs 1850 to Rs 2250/tonne, primarily aided by an uptick in steel prices. 

Our Perspective 

On a QoQ basis, for the quarter, blended steel realisations are expected to increase by ~Rs 2000 to Rs 3000/tonne. On the cost side, for Q4FY23E, coking coal prices are expected to be stable on a sequential basis. For Q4FY23E, coking coal consumption cost is expected to be flattish (+/- US$ 10/tonne), when compared with Q3FY23. Subsequently, for Q4FY23E aided by uptick in steel prices, on a QoQ basis, steel companies within our coverage universe are likely to report a sequential increase in EBITDA/tonne of ~Rs 1850 to Rs 2250/tonne. For Q4FY23E, EBITDA/tonne of Tata Steel (standalone operations) is expected to come in at Rs 13250/tonne (Rs 11350/tonne in Q3FY23). For Q4FY23E, standalone operations of JSW Steel are likely to post an EBITDA/tonne of Rs 10000/tonne (Rs 8141/tonne in Q3FY23). SAIL’s EBITDA/tonne for Q4FY23E is likely to come in at Rs 7250/tonne (Rs 5003/tonne in Q3FY23). On the volume front, for the quarter steel firms (except JSW Steel) under our coverage universe are likely to report flattish volume on a YoY basis while JSW Steel, on the other hand, is likely to post double-digit YoY volume growth for the quarter. On a sequential basis, steel firms are likely to report volume growth in the range of ~ 8-13% QoQ.

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