On Monday, Citi revised its price target for JSW Steel Ltd (JSTL:IN), one of India's major steel producers, reducing it to INR650 from the previous INR750. The firm maintained its Sell rating on the stock.
This adjustment follows the company's first-quarter performance, where standalone EBITDA decreased by 12% year-over-year, attributed to lower blended realizations, which saw a 4% drop compared to the previous year.
Despite a decrease in costs by 2% and a 3% increase in volumes, JSW Steel's standalone EBITDA faced a sequential fall of about 4% on volumes. The EBITDA per tonne stood at Rs8,400 compared to Rs7,800 in the fourth quarter and Rs9,860 in the same period last year. Additionally, the performance of JSW Steel's US operations saw a decline quarter-over-quarter.
Management at JSW Steel has indicated that India's steel spreads are expected to improve, despite currently soft steel prices. This anticipated improvement is based on the lowering of coking coal and iron ore prices.
However, the global team at Citi does not foresee a significant stimulus for steel-intensive sectors, as China's steel production has decreased by approximately 2% year-to-date, with demand also falling by around 5%.
In the Indian market, steel prices have been declining in line with regional trends and continue to command a premium over import parity prices. The firm noted that this trend limits the visibility on potential expansion in EBITDA per tonne for JSW Steel.
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