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JSW Steel Q4FY22 Review: Steady operational performance; subsidiaries surprise positively

ICICI Securities 30 May 2022

What’s Buzzing:

JSW Steel reported a steady consolidated operational performance in Q4FY22 wherein EBITDA per tonne of standalone operations came in marginally lower than our estimate. However, better-than-expected performance from subsidiaries and higher-than-expected sales volume at standalone operations aided JSW Steel’s overall consolidated performance.

Context:

For Q4FY21, JSW Steel reported quarterly saleable steel sales volumes of 5.11 million tonnes (MT), higher than our estimate of 4.90 MT. For the quarter, JSW Steel standalone operations reported EBITDA/tonne of Rs 13517/tonne, marginally lower than our EBITDA/tonne estimate of Rs 14000/tonne. Consequently, standalone EBITDA for the quarter was at Rs 6907 crore, broadly in line our estimate of Rs 6860 crore. However, performance of subsidiaries came in better than our estimate. As a result, consolidated reported EBITDA came in higher than our estimate. Consolidated EBITDA for the quarter was at Rs 9184 crore, higher than our estimate of Rs 8610 crore.

Our Perspective:

For Q1FY23E, we expect JSW Steel’s EBITDA/tonne to moderate from Q4FY22 levels. Elevated coking coal prices coupled with softening steel prices (especially after the levy of 15% export duty of major steel products), is likely to put downward pressure on JSW Steel’s EBITDA/tonne. For Q1FY23E, coking coal prices are expected to be ~US$125/tonne, higher compared to Q4FY22. In terms of guidance, for FY23E JSW Steel has given a combined sales volume guidance of 24 MT (~20.2 MT in FY22). Of this, sales volume from Indian operations (Including joint control would be 23.3 MT and balance 0.7 MT would be from JSW Steel’s Ohio, US operations. The Indian operations (including joint control) volume of 23.3 MT can be further bifurcated into 22.60 MT for consolidated Indian operation and 0.7 MT for JSW Ispat Special products (joint control).

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