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JSW Steel Q1FY23 Review: Subdued consolidated performance; subsidiaries surprise negatively

ICICIdirect Research 25 Jul 2022 DISCLAIMER

What's Buzzing:

JSW Steel reported a subdued consolidated performance for Q1FY23 wherein while EBITDA per tonne of standalone operations came in broadly in line with our estimate, but muted performance from subsidiaries led to lower than expected consolidated EBITDA and PAT for the quarter.

Context:

For Q1FY23, JSW Steel reported standalone steel sales volumes of 4.03 million tonnes (MT), broadly in line with our estimate of 4.10 MT. For the quarter, JSW Steel standalone operations reported EBITDA/tonne of Rs. 8318/tonne, broadly in line with our EBITDA/tonne estimate of Rs. 8250/tonne. Consequently, standalone EBITDA for the quarter was at Rs 3352 crore, broadly in line our estimate of Rs 3341 crore. However, performance of subsidiaries came in lower than our estimate. As a result, consolidated reported EBITDA came in lower than our estimate. Consolidated EBITDA for the quarter was at Rs 4309 crore, lower than our estimate of Rs 4716 crore.

Our Perspective:

For Q2FY23E, we expect JSW Steel’s standalone operations EBITDA/tonne to decline from Q1FY23 levels, primarily on account of lower steel prices sequentially. While coking coal consumption cost for Q2FY23E are likely to decline by ~US$ 50-60/tonne QoQ, sequential fall in steel prices during Q2FY23E is expected to higher than the benefit of moderating coking coal costs. Hence JSW Steel standalone operations EBITDA/tonne for Q2FY23E is expected to be lower than Q1FY23 levels. JSW Steel’s capex spend was to the tune of Rs 3702 crore during Q1FY23. Considering the current market conditions, the company expects to calibrate its capex spend to Rs 15000 crore for FY23 (from Rs 20000 crore earlier).

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