JSW Steel Q1 Preview: Lower sales, realisation to mar show; FY24 outlook crucial

JSW Steel Ltd is likely to report weak earnings for the quarter ended June, primarily due to sluggish sales volumes and sharply lower realisations. India’s largest steel producer is seen reporting a 14% year-on-year (YoY) drop in consolidated net profit for the quarter to Rs 722.4 crore, according to the average of estimates given by seven brokerage firms. The consolidated revenue is seen rising just 4% YoY to Rs 39,626 crore.

Sequentially, the drop is expected to be quite steep both in the bottomline and topline. The sales may fall nearly 16%, while profit could plunge more than 80%. The steel maker is scheduled to detail its first quarter earnings on Friday.

JSW Steel’s consolidated crude steel output, including that of JSW Ispat Special Products, increased 12% on year to 6.61 million tonne in the quarter ended June, led primarily by the domestic business, according to the provisional update shared by the company.

Crude steel output in India grew 10% on year to 6.19 million tonne, but was down about 3% sequentially. If one looks at the stock performance, JSW Steel has net gained 14% in the June quarter, and even went on to test its lifetime high of Rs 815.70 earlier this month. But on a year-to-date basis, the stock has underperformed Nifty 50 by around 7%.

Here is a summary of analyst expectations on the June quarter earnings of the company:

Motilal Oswal Securities
JSTL is expected to post consolidated sales volumes of 5.6 million tonne. Revenue/EBITDA are expected to decline by 15%/39% QoQ. Performance of overseas subsidiaries and movement of coking coal cost will be crucial. Management commentaries on FY24 production and sales, as well as ramping up production of captive iron ore mines are important monitorables.

Kotak Institutional Equities
Expect JSTL to report standalone volume of 4.8 million tonne (+20% YoY, -15% QoQ). Expect steel realization to decrease by 2.9% QoQ (-18% YoY), led by price cuts during the quarter.

Expect standalone EBITDA/tonne to decline by 28% QoQ to Rs 7,890/tonne (-33% YoY) led by lower realizations and high-cost coking coal inventory.

Nuvama Institutional Equities
JSW Steel is expected to report an EBITDA decline due to lower volume (down by 17% QoQ to 4.7 million tonne) and realisation (down by 2.3% QoQ). The decline in volume is primarily attributable to lower exports. The cost during the quarter should be high due to higher coking coal and iron ore costs.

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