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Steel companies' EBITDA/tonne to increase sequentially in Q3FY23 - Metal Q3 Preview

ICICIdirect Research 12 Jan 2023 DISCLAIMER

What's Buzzing 

For Q3FY23E, on a QoQ basis, steel companies are likely to report a sequential increase in EBITDA/tonne to the tune of ~Rs 2500 to Rs 3500/tonne. 

Context 

During Q3FY23, despite a sequential fall in blended steel realisations, domestic steel companies' EBITDA/tonne is likely to witness an uptick on a QoQ basis, primarily aided by lower coking coal consumption costs. 

Our Perspective: 

For Q3FY23E, on a QoQ basis, steel companies are likely to report a sequential increase in EBITDA/tonne to the tune of ~Rs 2500-3500/tonne, primarily aided by lower coking coal consumption costs. On a QoQ basis, for the quarter, blended steel realisations are expected to decline by ~Rs 1000 to Rs 2000/tonne. The sequential improvement in EBITDA/tonne was primarily on account of lower coking coal consumption costs, which is expected to decline by ~US$70-80/tonne in Q3FY23E compared to Q2FY23. For Q3FY23E, EBITDA/tonne of Tata Steel (standalone operations) is expected to come in at Rs 12500/tonne (Rs 10177/tonne in Q2FY23). For Q3FY23E, standalone operations of JSW Steel are likely to post an EBITDA/tonne of Rs 7000/tonne (Rs 3477/tonne in Q2FY23). SAIL's EBITDA/tonne for Q3FY23E is likely to come in at Rs 4250/tonne (Rs 1740/tonne in Q2FY23). For Q3FY23E, within the stainless steel segment, standalone EBITDA/tonne of Jindal Stainless (JSL) and Jindal Stainless (Hisar) (JSHL) is also likely to register a sequential improvement of ~Rs 2400/tonne to ~Rs 2800/tonne. For Q3FY23, we expect standalone operations of JSL to report EBITDA/tonne of Rs 18000/tonne (Rs 15208/tonne in Q2FY23) and JSHL to report EBITDA/tonne of Rs 18500/tonne (Rs 16085/tonne in Q2FY23).

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