Why Analysts Cut Target Price For JSW Steel After Q1 Results
Most analysts cut their target price for JSW Steel Ltd. as weak demand and lack of credit availability resulted in more than 50 percent drop in the steelmaker’s earnings for the June quarter.
Rising debt, due to the ongoing capex plan and delayed acquisition of Bhushan Power & Steel Ltd. also led to lower targets, the brokerages said in their research notes.
The Sajjan Jindal-led steelmaker’s net profit fell 56 percent year-on-year to Rs 1,028 crore in the June quarter. Its operating profit, too, declined 27 percent over last year to Rs 3,716 crore.
Yet, the analysts maintained their investment recommendation on the stock. JSW Steel expects the government’s infrastructure spending to revive in the next quarter and that would help it unwind inventory and maintain guidance for the year.
Shares of JSW Steel fell as much as 3.42 percent on Monday to Rs 241 apiece. The company had declared its first-quarter results on Friday.
Here’s what some of the brokerages said about JSW Steel’s Q1 results:
- Maintains ‘Hold’ but cuts target price to Rs 285 from Rs 316 apiece.
- Earnings lower than consensus due to higher-than-expected losses at overseas subsidiaries.
- Domestic Ebitda to remain within Rs 9,500-9,700 despite price woes.
- Capex commitments in a challenging macro environment is a key overhang.
- Cuts estimate for FY20 and FY21 Ebitda by 4 percent each on account of prevailing soft prices.
- Maintains ‘Add’ but lowers target price to Rs 272 from Rs 305 apiece.
- Cut FY20 and FY21 earnings per share estimate to Rs 22/27 from Rs 30/32 on stronger rupee assumption.
- Revision also on account of expensive acquisition of Bhushan Power & Steel.
- Sees strong headwind for the company in medium term.
- Steel demand improvement in the second half of FY20 is key for re-rating of the stock.
- Maintains ‘Neutral’ and retains its target price of Rs 290 apiece.
- India’s demand for steel to be the key driver.
- Steel demand impacted by muted business sentiment and lack of credit availability.
- Higher export volumes and long-term contracts keep realisations stable.
- Outlook for steel demand for second quarter of FY20 and second half of FY20 remains positive.
- Maintains ‘Sell’ and retains its target price of Rs 225 a share.
- Good show on standalone level despite challenging environment.
- Negative stance due to delay in turnaround of overseas subsidiaries, dismal volume growth.
- Increasing debt also attributes to negative stance on the counter.