Domestic brokerage firm ICICI Securities has downgraded the stock of JSW Steel to a 'sell' from a 'reduce' while maintaining the target price of ₹448 per share.
The brokerage firm said the downgrade of the stock is primarily because of the recent gain in the stock price.
"We downgrade the stock to a 'sell' from a 'reduce' due to an increase in the share price of 6% from July 4, 2022, with an unchanged target price of ₹448 per share. We value JSW Steel on FY24E P/B at 1.2 times," said ICICI Securities.
JSW Steel Ltd, on Friday, reported an 85.8% decline in its consolidated net profit to ₹838 crore for the April-June quarter (Q1FY23). The company had clocked ₹5,904 crore net profit in the year-ago quarter (Q1FY22).
As Mint reported earlier, the firm had posted a net profit of ₹3,234 crore in the March 2022 quarter. In Q1FY23, the company's India steel consumption was at 27.36 million tonnes, down by 5.6% sequentially. While exports dropped by 26% to 2.88 million tonnes, due to weaker global demand and imposition of export duty.
ICICI Securities said that JSW Steel's auto contract realisations settled for long products higher by ₹9,000/te in Q1FY23, but will likely shrink by ₹4,000/te in Q2FY23E.
"Export duty hit on JSWS’ consolidated operations in Q1FY23 was ₹242 crore. JSW Coated reported a negative EBITDA due to inventory losses (NRV provisions). Net debt increased by ₹10600 crore QoQ due to inventory buildup of ₹6800 crore (nearly 1mnte) as well as a forex impact of ₹1440 crore," said ICICI Securities.
"The company expects debt to reduce by end-FY23. Volume guidance is yet to alter as management sees export opportunities resuming in the second half of FY23. Q2FY23 will witness the major brunt of steel price decline while raw material costs (coking and iron ore) will progressively reduce, according to the management," said ICICI Securities.
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