Q2 Preview- JSW Steel to benefit from lower costs, rise in volumes.

JSW steel Ltd will report its Q2 performance on Friday. While the strong steel demand in the country  is likely to support company’s volume growth, the benefits of lower raw material prices in the previous quarters will flow during Q2.

The steel prices in the country, however, had continued to soften till July. Though steel prices have been regularly improving thereafter during the quarter and have improved much by Q2 end, nevertheless average steel prices in Q2 may still be lower than Q1. The Hot Rolled Coil (HRC) prices as per Motilal Oswal Financial Services Ltd (MOFSL) estimates averaged 2% lower sequentially.

The lower realizations may limit revenue and profitability growth even though higher volumes may  accrue positives.

JSW Steel already had reported its consolidated Crude Steel production for the second quarter of FY24, which at 6.41 mt (million tonne) marked a growth of 13% YoY. Sequentially it was downs marginally by 3%, primarily due to scheduled shutdowns undertaken at Indian operations and lower capacity utilisation at USA-Ohio due to market conditions. Domestic steel production (standalone) grew 13% year-on-year to 6.27 mt, down 2% sequentially. Analysts at MOFSL said that JSW Steel is expected to post higher volumes sequentially in 2QFY24.

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Analysts at Kotak Institutional Equities expect JSW Steel to report standalone volume of 5.3 million tons up 6% year-on-year, 7.7% sequentially. They estimate steel realization to decrease by 2.5% sequentially (flat year-on-year) led by price cuts during the quarter

The company’s sales at Rs42,300 crore are expected to rise 1.2% sequentially. Though Ebitda at ₹6600 crore may rise three folds from year ago quarter it may decline 6.8% sequentially. The Ebitda per tonne thereby at ₹10,527 is likely to be lower than 12,340 in the previous quarter though may go multifold ₹7,963 in previous quarter as per MOFSL estimates.

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The company is likely to report net profits at ₹2100 Crore during the quarter versus a loss during the year ago at the consolidated level. On sequential Basis may decline by about 8.5%

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Updated: 20 Oct 2023, 01:57 PM IST