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    Add JSW Steel, target price Rs 214: ICICI Securities

    Synopsis

    The brokerage downgraded JSW Steel to add from buy rating given the run-up in the stock price (35 per cent from Mar, ’20 end).

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    ICICI Securities has given an add rating to JSW Steel with a target price of Rs 214. The share price moved down by -0.95 per cent from its previous close of Rs 193.75. The stock’s last traded price is Rs 191.90.

    JSW Steel is looking to spend $1.2 billion in FY21E, of which, mining capex will be $106 million. Capex spend planned for FY22/23 is $2.17 billion. Standalone and consolidated net debt stood at Rs 500 billion and Rs 534 billion, respectively. Around $6.5 billion worth of capex programme over FY18-22 has seen $3.17 billion of capex spent over FY18-20. This, along with weakening of the steel cycle, has ensured that consolidated net debt to EBITDA increases to 4.5 times by end FY20.

    Investment Rationale

    The brokerage downgraded JSW Steel to add from buy rating given the run-up in the stock price (35 per cent from Mar, ’20 end). The company’s FY20 annual report shows increasing support from standalone business to help overseas subsidiaries, as many of them continue to incur losses. Also, related-party transactions are limited and some support extended to JSPL, while JSW International Tradecorp is helping with receivables.

    The captive iron ore mines are adding to integration while increasing other expenses – royalty from Karnataka mines is Rs 6.5 billion in FY20. JSW Steel is focused on setting up pipe conveyor to transport ore from the recently won Odisha mines; pipe conveyor in Karnataka helped dispatch 3.39mnte in FY20. A significant capex remains in the pipeline; ND/EBITDA expanded to 4.5 times and Bhushan Power acquisition hearings are yet to be completed in the Supreme Court.

    JSW Steel-ICICISecuritiesJuly72020
    Source: ICICI Securities


    Financials

    For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 17556.00 crore, down -.62 per cent from last quarter sales of Rs 17666.00 crore and down -19.60 per cent from last year's same quarter sales of Rs 21837.00 crore. The company reported net profit after tax of Rs 217.00 crore in the latest quarter.

    Promoter/FII Holdings

    Promoters held 42.71 per cent stake in the company as of March 31, 2020, while FIIs held 17.13 per cent, DIIs 4.9 per cent and public and others 35.26 per cent.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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