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Steel - EBITDA/ton is expected to bottom out


Overall Q3FY25 performance for major steel players i.e. Tata Steel, JSW Steel, and Jindal Steel and Power have come out on an expected line.
Volume growth for the quarter came in single digit for large steel players with outlook promising amidst impending tariff decision and infrastructure spend by the central government.
Most of the players witnessed decline in metal realisations especially – flat steel amid incessant rise in steel imports. This more than mitigated the benefits accrued on account of coking coal price decline which was down US$ 30+/tonne QoQ for most of the players. Iron ore prices however remained at elevated levels impacting the overall profitability.
EBITDA/ton is expected to bottom out for the domestic steel players with improvement expected from Q4FY25 onwards, driven by a gradual recovery in steel prices, along with an anticipated decline in iron ore and coking coal costs, by ~₹350/ton and ~$10/ton, respectively.
JSW Steel reported better than street expectation with EBITDA/tonne at ~₹8,000/ton owing to improvement in product mix. Retain BUY with unchanged target price of ₹ 1,130
Jindal Steel and Power reported marginal decline in EBITDA\tonne despite a sequential rise in average blended realization and was below street expectations.
EBITDA/tonne for the quarter declined by ~₹400/ton to ~₹11,494/ton due to higher iron ore and overhead costs. We have retained our BUY rating on JSPL with revised target price of ₹ 1,000. We believe that the market reaction was overdone on new capex announcement with company guiding for double digit RoCE’s on all its capital decisions.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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