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On Monday, CLSA analyst Indrajit Agarwal adjusted the price target for JSW Steel Ltd (NSE:JSTL:IN), reducing it to INR780.00 from the previous INR820.00 while maintaining an Underperform rating on the stock.
The revision follows JSW Steel's third-quarter consolidated EBITDA report, which, at Rs56 billion, showed a 22% year-over-year decline yet surpassed CLSA's estimates due to better performance by domestic subsidiaries.
Despite the company's strong volume growth, its standalone EBITDA per tonne dropped by Rs890 per tonne quarter-over-quarter, falling short of CLSA's projections. JSW Steel also trimmed its full-year volume guidance by 2% due to a slight delay in the ramp-up of its capacities. The firm anticipates that costs in the fourth quarter will ease, owing to declining coking coal and iron ore prices, along with efficiency gains from the capacity ramp-up.
JSW Steel's net debt experienced a marginal quarter-over-quarter decrease, but it is anticipated to remain high in the coming years due to the company's ongoing expansion projects. CLSA predicts that the firm's profitability will likely recover from its fiscal year 2025 lows, but this recovery is dependent on regional demand dynamics and the potential implementation of safeguard duties.
In summarizing their stance, CLSA stated, "Profitability is likely to improve from its FY25 lows in our view, but the price uptick will hinge on regional demand and the imposition of safeguard duties, if any. We maintain our Underperform recommendation but lower our target price from Rs820 to Rs780." The revised price target reflects these factors, as well as the company's recent performance and market conditions.
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