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Turnaround performance; further improvement likely in Q4 - JSW Steel Q3

ICICIdirect Research 22 Jan 2023 DISCLAIMER

What's Buzzing 

After reporting a consolidated net loss in Q2FY23, JSW Steel is back in the black reporting a consolidated net profit during Q3FY23. 


For Q3FY23, JSW Steel’s standalone EBITDA was at Rs 4030 crore, up 131% QoQ. Standalone EBITDA came in healthy sequentially, primarily due to a reduction of coking coal costs. The performance of subsidiaries also came in healthy, which aided the consolidated EBITDA. Consolidated EBITDA for the quarter was at Rs 4547 crore, up 160% QoQ. Aided by a healthy operational performance, JSW Steel reported consolidated PAT of Rs 474 crore for Q3FY23 compared to consolidated net loss of Rs 915 crore in Q2FY23. 

Our Perspective 

A sequential drop in coking coal costs aided JSW Steel to report a healthy performance in Q3FY23. For Q3FY23, sequentially coking coal cost declined by ~US$100/tonne compared to Q2FY23. Coking coal costs are expected to remain range bound in Q4FY23 when compared with Q3FY23. Similarly, iron ore costs are also expected to remain range bound in Q4FY23 compared to Q3FY23. While during Q4FY23 sequentially major costs are expected to be range bound, blended steel realisations are expected to be higher in Q4FY23 compared to Q3FY23. Sequentially, realisations are expected to trend higher in Q4FY23, in line with global steel prices. Higher steel realisations on a QoQ basis are expected to aid sequential uptick in JSW Steel’s EBITDA/tonne during Q4FY23 when compared to Q3FY23 thereby auguring well for the company. On the domestic demand front, the outlook for residential real estate, autos and renewables remains strong. Overall, for the steel sector as China has eased Covid related restrictions, it has led to an uptick in prices The uptick in global as well as domestic steel prices augurs well for JSW Steel, which would aid JSW Steel’s financial performance, going forward.

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