JSW Steel is down 4% after reporting lower-than-expected fourth-quarter earnings; analysts say steel export duties are a major profit drag.

  • May 30, 2022, 12:16 p.m.

NSE -2.06 % tumbled 4.17 per cent in early trade on Monday after the metal major reported a 20 per cent decline in its consolidated net profit to Rs 3,343 crore for the March 2022 quarter, dragged by higher expenses.

The company had clocked Rs 4,191 crore worth of net profit in January-March 2020-21. The numbers were lower as the company recorded an exceptional loss of Rs 741 crore. The profit figure was also lower than ET Now analysts’ poll projection of Rs 4,100 crore.

The firm’s share price fell to a low of Rs 525.75 as against Rs 548.65 at the previous close on the BSE.

The one-time loss relates to a subsidiary company in the USA that received a final arbitration order on its dispute with the lessors of the coking coal mining lease and plant lease and a consequential notice of termination of lease.

"JSTL reported strong sales volumes, but EBITDA/t was under pressure as coking coal price and inflation of certain other commodities impacted spreads... we turn negative on the stock as well as the sector due to likely further near-term pressure on spreads," analysts from Nomura wrote.

"...We expect the imposition of export duties to not only keep domestic prices under check but also lead to a deflationary trend... removing export duty may be crucial to restoring profitability by reviving exports."

Nomura has reduced its target price on JSW Steel’s stock from Rs 667 to Rs 500 while lowering its rating to reduce from neutral.

The total revenue from operations stood at Rs 46,895 crore during the quarter, jumping 74.11 per cent from Rs 26,934 crore.

The Board of Directors recommended a final dividend of Rs 17.35 per share. For the quarter, the company said, it recorded the highest ever quarterly crude Steel production at 5.8 lakh metric tons, up by 11 per cent QoQ and 38 per cent YoY.

It also recorded the highest ever quarterly saleable steel sales at 5.99 metric tons, up by 29 per cent QoQ and 47 per cent YoY. Operating Ebitda came in at Rs 9,184 crore, up by 1 per cent QoQ and 9 per cent YoY.

Author : Rajdhani Delhi Representative

Rajdhani delhi representative

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