JSW Steel (JSTL IN) Buy: Massive growth capex start, well supported by balance sheet and organic cash flows

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JSW Steel (JSTL IN) Buy: Massive growth capex start, well supported by balance sheet and organic cash flows

t/EBITDA is 1.8x; b) strong

organic cash flows (as JSW delivers 8-10% volume CAGR from ongoing expansions, 52-WEEK PRICE (INR)

with steady EBITDA/t) and c) strong execution capabilities. However, given the large 1700.00

capex programme, continued strong steel market (demand growth of 6-7%) and 1295.00

protection from any surge in cheap steel imports will be key.

890.00

Strong 4Q, Net debt decline q/q: Consolidated reported EBITDA stood at INR86.3bn 05/25 Target price: 11/251540.00 05/26

(35% y/y, 33% q/q) vs Bloomberg consensus at INR85.2bn and consolidated reported High: 1283.40 Low: 968.55 Current: 1274.90

PAT stood at INR164bn v/s consensus at INR26.9bn aided by one time exceptional Source: LSEG IBES, HSBC estimates

gain from the BPSL transaction. Reported Net debt declined sharply q/q to INR539bn

Pinakin Parekh*

in 4Q vs INR803bn in 3Q post the BPSL transaction. India operations EBITDA/t stood Senior Analyst, India Metals and Cement

at INR12,211/t (adjusted basis) increasing by INR3,422/t driven essentially by higher HSBC Securities and Capital Markets (India) Private

Limited

ASP/t (INR3,690/t q/q increase). JSW also acquired BMM Ispat (related party) at an pinakin.parekh@hsbc.co.in

EV of INR64bn. BMM Ispat is a 1MT long steel plant with land availability to take +91 22 40891549

capacity to 1.8MT. Shrikant Lakhani*

Analyst, India Metals and Cement

HSBC Securities and Capital Markets (India) Private

Steel price increase in 1Q should cover cost inflation thus driving margins Limited

higher: While JSW did not lay out the expected ASP/t increase in 1Q, it did highlight shrikant.h.lakhani@noexternalmail.hsbc.com

+91 80 3001 4021