JSPL’s Q2 results aid investor confidence

Q2FY23 had seen steel prices in the country trend lower as average prices of flat and long steel products contracted 17% and 4% sequentially, respectively, as per analysts. On the other hand, energy costs had continued to rise with higher coal prices.

JSPL, however, managed to report better-than-expected realisations helped by product mix, said analysts. Standalone sales volumes at 2.01 mt rose 16% sequentially as after destocking in Q1, demand improved. Export volumes, however, took a hit, accounting for 11% of sales in Q2, versus 26% in Q1, as a consequence of export duty and weakened global demand.

Analysts at Motilal Oswal Financial Services Ltd said the company reported yet another in-line quarter. While the topline was higher than their estimates, driven by higher average selling price, earnings were in line after adjusting for forex gains.

Net sales realisations at standalone levels at ₹65,209, fell 2% year-on-year, but were up 1% sequentially. Standalone sales at ₹13,110 crore were better than ₹12,850 crore in Q1.

The company said that 2QFY23 consolidated gross revenues rose 5% sequentially to ₹15,534 crore, largely led by improvement in standalone revenues. Adjusted EBITDA of ₹1,519 core fell 49% sequentially. 2QFY23 net profit (before exceptional) declined 54% on quarter to ₹892 crore. Reported net profit stood at ₹219 crore.

Going ahead, steel demand is likely to improve gradually, leading to better prices . The company comparatively remains well placed on raw material side, as it has coal mines in Mozambique and Australia that provide a hedge against higher prices

Analysts at Motilal Oswal Financial Services Ltd said the second half is generally seasonally strong for construction steel. They believe JSPL will benefit from lower coal costs in 3QFY23 as well as its improved average selling price compared to competition (that are flat steel oriented where the price hike has not been effective).