JSW Q3 PAT Dips 90% On Lower Exports

Its consolidated profit after tax fell to ₹476 crore compared to ₹4,516 crore in the year ago, with exports contracting 62% and finance costs rising 42% to ₹1819 crore. Its earnings before interest, taxes, depreciation and amortization halved to ₹4,547 crore during the quarter. However, JSW expects to improve its competitive edge in subsequent quarters following the export duty rollback in November 2022.

“Export duties on finished steel products imposed in May 2022, were rolled back on 19 November. It should improve the competitiveness of Indian steel industry in global markets going forward," JSW Steel said in a post-result press note.

Both topline and bottomline were below Bloomberg’s consensus estimates. Revenue missed estimates by 1.18% , but adjusted profit at ₹4,900 crore was 56% below the estimates.

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Indian sales volume was up 24% from a year earlier to 5.55 million tonnes, on the back of Dolvi Phase-II ramp-up as well as healthy domestic demand, but was down 2% sequentially due to the fall in exports. Total sales volumes, including JISPL and the Ohio plant stood at 5.71 million tonnes.

“The combined volume performance was on back of better capital utilization of 91% and restarting of operations at JISPL," Siddhartha Khemka research head of retail, at JSW Steel, said. “But, this was below our estimates of 5.99 million tonnes," he added.

Its Ebitda per tonne was at ₹7963, compared to estimates of ₹9,325 per tonne.

The stock closed 2.5% down at ₹740.95 on BSE ahead of the release of the Q3 numbers.

“Technically, the stock has formed a lower top, which is negative, unless it crosses the ₹775 mark," Shrikant Chouhan, research head of retail at Kotak Securities, said. “Based on this, the JSW stock may test lower levels of ₹725-710 in the near term."

While flagging concerns of a mild recession in developed markets, it said re-opening of China and falling inflation globally may provide tailwinds to global growth, thus improving metal demand.

“Global economic outlook remains uncertain on the back of policy tightening by central banks as well as the impact from the conflict in Ukraine. Supply chains have improved and inflation across major economies is cooling off but there may be risk of a mild recession in 2023 in the developed markets," it said.

“Falling inflation and reversal in zero covid strategy in China should provide tailwinds to growth in the second half of 2023."

It said that the fundamental growth drivers in India remain robust, with strong manufacturing and services PMI indicators and positive high frequency indicators. The government’s focus on infrastructure is expected to continue in the upcoming budget. Healthy corporate and banking sector balance sheets, rising credit growth and improving consumer and business confidence should support growth in the near term, despite headwinds from the global slowdown, it added.