On Monday, Jefferies reiterated a Hold rating on JSW Steel Ltd (JSTL:IN) with a steady price target of INR860.00. The firm's analysis noted that JSW Steel's first-quarter EBITDA dropped by 22% year-over-year and by 10% quarter-over-quarter. Despite this, the figures were 12% higher than Jefferies' estimates. The company's standalone EBITDA per tonne saw an 8% increase from the previous quarter.
The report highlighted the potential for new capacities to bolster a strong 13% compound annual growth rate (CAGR) in JSW Steel's India volumes from the fiscal year 2024 to 2026. Additionally, the anticipated lower coking coal prices are expected to support the company's margins in the second quarter, even in the face of declining steel prices.
Jefferies' outlook on JSW Steel is positive regarding the company's volume growth. However, the firm expressed concerns about the stock's valuation, noting that it is trading at 2.6 times the projected book value for the fiscal year 2025, with an expected return on equity (ROE) between 11-15% for the fiscal years 2025 to 2026. Consequently, Jefferies has reduced the earnings per share (EPS) forecast for JSW Steel for the fiscal year 2025 by 9%, while largely maintaining the estimates for 2026 and 2027. The Hold rating has been retained by the firm in light of these assessments.
InvestingPro Insights
InvestingPro data and analysis provide a deeper dive into JSW Steel Ltd's (JSTL:IN) performance and position within the industry. According to InvestingPro Tips, JSW Steel stands out with its impressive gross profit margins, indicating efficient operations and strong pricing power within the Metals & Mining sector. The company's prominence as a key player in the industry is further solidified by its consistent dividend payments over the past 20 years, showcasing its commitment to shareholder returns.
InvestingPro Data reveals that JSW Steel has been trading near its 52-week high, suggesting robust investor confidence in the stock. Analysts contributing to InvestingPro predict the company will maintain profitability this year, supported by its profitable performance over the last twelve months. Furthermore, investors looking at the long-term perspective will find JSW Steel's strong return over the past five years reassuring, which aligns with the company's strategic growth initiatives and capacity expansions.
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