InvestorQ : I am having shares of JSW Steel and I want to know whether I should hold on to the shares after its performance in the latest quarter?
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I am having shares of JSW Steel and I want to know whether I should hold on to the shares after its performance in the latest quarter?

Answer
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2 years ago
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There is a challenge of costs and huge fund raising but it could be a neutral play on the steel sector. The net profits of JSW Steel for the fourth quarter fell by 50% to Rs.1495 crore. Net Sales for the company were marginally up by 4.8% at Rs.22,368 crore. Despite pressure on the pricing, the company did manage to report growth in sales volume. One of the big drivers of the top line was the 22% share of exports as the company shifted its focus to the international markets.

The major challenge in the quarter for JSW Steel was the sharp contraction in EBITDA margins from 25.4% to 19.8% and this was largely an outcome of a sharp rise in raw material and other input costs. The company already has a debt of Rs.46,000 crore and this debt will see an increase as the company anticipates another Rs.48,000 crore of capital spending in the next 3 years. This is likely to add to the debt of the company substantially. However, the company is likely to benefit from the long term growth in steel demand. It is likely to be a good long term buy in the portfolio since at the current market price of Rs.283, the stock is quoting at less than 8X P/E ratio. But, the stock is likely to be under pressure in the short term.

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