Brokers’ opinion on JSW Steel’s first quarter performance, investment in paint business


Analysts applauded the above-estimated operating performance by JSW Steel Ltd. in the first quarter, driven by better achievements on higher alloy prices, but remained cautious about the plant’s investment in paint business.

JSW Steel saw its profits and revenues jump 41% and 7%, respectively, from the previous quarter in the three months ended in June. Its operating profit jumped more than 21%, while its margin increased during the period.

Separately, the steelmaker’s board of directors has approved a strategic investment of around Rs 750 crore in JSW Paints Pvt. Ltd. in three to four installments, according to an exchange file. JSW Paints’ revenue, he said, was Rs 430.48 crore for the fiscal year ended March 2021.

In the first tranche, the company will invest 299.9 crore rupees and subscribe for shares equivalent to approximately 7.5% of the issued and paid-up share capital of JSW Paints, and 6.88% on a fully diluted basis by the end of the year. end of the second quarter of fiscal 2021. -22, the record says. It will complete the remaining tranches during the period FY2022-23 to FY2024-25.

The total percentage of stake to be acquired by the steelmaker in JSW Paints in all tranches will be calculated on the basis of the valuation to be undertaken at the relevant time, in accordance with the Companies Act 2013 and by one of the big four firms accountants. , says the record.

Here’s what the brokerage firms have to say about JSW Steel’s performance and investments in the first quarter in the paints business …

JP Morgan

  • Maintains a “neutral” rating, with a target price of Rs 700 each.

  • JSW’s Ebitda / PAT broke high expectations for the first quarter.

  • Surprised by the company’s investments in the group’s entities.

  • Investments are not large in the context of JSW’s cash flow but surprising.

  • The second quarter should see its margin reduced given the increase in coking coal and the decline in the average selling price.


  • Maintains the “neutral” rating but increases the target price to Rs 747 from Rs 697.

  • Strong results in Q1FY22, supported by a sharp rise in steel prices.

  • Headwinds emerge from rising commodity prices and falling exports from the second quarter of FY22.

  • Do not see these high spread levels as lasting.

Investec Securities

  • Keeps the “buy” rating, with a target price of Rs 860 each.

  • JSW Steel recorded an operational pace thanks to better prices / spreads.

  • Net debt has increased due to the increase in working capital.

  • Management remains confident about the export order book, volume forecasts and price trends.

  • The additional investment in JSW Paints, a non-core area, is a concern.

Kotak institutional securities

  • Maintains the “buy” rating; increases fair value to Rs 665 from Rs 640 each.

  • The fair value increases to 6.5X EV / Ebitda in September 2023E.

  • JSW Steel’s FY22 first quarter EBITDA exceeded estimates due to higher steel realization.

  • Rising commodity prices suggest that margins have peaked.

  • JSW Steel’s 5-MTPA expansion is on track to be commissioned in the second quarter of fiscal 22E.

  • The company’s decision to invest Rs 750 crore in the group’s painting business could have been better structured to avoid governance issues.

  • Increase EBITDA by 20% / 4% for FY2022 / 23E on higher steel prices.

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