JSW Steel Reports Highest Ever Quarterly Profit; Announces Dividend of Rs 6.5 Per Share - Views on News from Equitymaster

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  • May 22, 2021 - JSW Steel Reports Highest Ever Quarterly Profit; Announces Dividend of Rs 6.5 Per Share

JSW Steel Reports Highest Ever Quarterly Profit; Announces Dividend of Rs 6.5 Per Share

May 22, 2021

JSW Steel reported a 1,717% year-on-year (YoY) rise in its consolidated net profit to Rs 42 bn for the quarter ended March (Q4FY21), the highest ever quarterly net profit posted by the company.

The Indian steelmaker had registered a net profit of Rs 1.9 bn for the same period last year.

For the fiscal year 2020-21, the company's net profit was up at Rs 78.7 bn. It was Rs 39.2 bn in the previous financial year.

The steel producer reported its highest-ever quarterly revenue from operations of Rs 269.3 bn, up 51% on a YoY basis.

Total revenue from operations for FY21 stood at Rs 798.4 bn, up 9% YoY as compared to Rs 733.3 bn in FY20.

The company also reported staggering earnings before interest, tax, depreciation, and amortisation (EBITDA) which was Rs 84.4 bn, up 184% YoY.

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EBITDA for the fiscal year 2021 stood at Rs 201.4 bn and grew 69.7%.

The operating performance was a reflection of the strong pricing environment for steel producers in the country who were able to undertake multiple price hikes during the quarter.

The exceptional March quarter performance by the company was on account of strong domestic demand for steel, supplemented by a benign export market. Improved steel prices were also a prime factor.

Earnings per share (EPS) stood at Rs 32.7 for the period ended 31 March 2021, as compared to Rs 16.7 for the period ended 31 March 2020.

Key Financial Indicators

Equity Dividend

The company's board of directors, at the meeting held on Friday, recommended a final dividend of Rs 6.5 per equity share on the face value of Rs 1 each, for the financial year 2020-21 to the equity shareholders.

The total outflow on account of the equity dividend will be Rs 15.7 bn, vis-a-vis Rs 4.8 bn paid for FY20.

Debt Profile of JSW Steel

JSW Steel reported that its consolidated net debt to equity ratio stood at 1.1 times at the end of the Q4FY21, against 1.5 times at the end of Q4FY20.

Net debt to EBITDA stood at 2.6 times during the period under review, as opposed to 4.5 times in the year-ago period.

The company's debt has come down by Rs 8.6 bn even after spending on capital expenditure and acquisitions aggregating to around Rs 150 bn during FY 2021.

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Key Acquisitions in FY21

Asian Colour Coated Ispat (ACCIL): JSW Steel acquired ACCIL in October 2020 for Rs 15.5 bn through IBC process.

It's a pure-play downstream company with a capacity of 1 million tons per annum (MTPA), with production facilities in Maharashtra and Haryana.

Bhushan Power and Steel (BPSL): The company acquired BPSL in March 2021 with stake of 49% through Insolvency and Bankruptcy (IBC) process. Payment to financial creditors in IBC process for 100% stake was Rs 193.5 bn. The cash outgo from the company was Rs 50.9 bn.

It's an integrated steel producer with liquid steel capacity of over 2.5 MTPA in Jharusuguda, Odisha, primarily flat steel. Downstream facilities in Kolkata and Chandigarh.

Acquisition gives JSW Steel strategic presence in Eastern India.

Plate and Coil Mill Division (PCMD) of Welspun Corp: JSW Steel acquired PCMD business of Welspun Corp for Rs 8.5 bn.

The company manufactures high-grade steel plates and coils. It is located in Anjar, a port-based facility in Gujarat with a capacity of 1.2 MTPA.

Acquisition enables JSW Steel's entry into different grades of steel products.

JSW Steel Examining Bid for Sanjeev Gupta's British Business

According to a leading financial daily, JSW Steel is considering a bid to buy Liberty Steel in Britain as well as mills elsewhere, as would-be buyers circle Sanjeev Gupta's global commodities empire.

JSW's interest, which extends to plants including Mr Gupta's Adhunik steel mill in eastern India, could mark yet another chapter for Britain's steel industry, which has been privatised and sold to overseas buyers as its pre-eminence slid in lock-step with the country's manufacturing might.

Although JSW Steel, part of the metals to cement conglomerate JSW Group which is controlled by billionaire Sajjan Jindal, was interested in bidding, one of the sources said, there were obstacles to any deal, including navigating the fallout from Brexit as well as India's coronavirus crisis.

An Overview on Metal Stocks; What Really Triggered the Rally in India

The rally in the metal stocks has been witnessed by all market participants in the last few months.

The Nifty Metal Index has given a return of almost 100% in the last six months.

The global demand for steel has increased from negative 0.2% in 2020 to 5.8% in 2021. In India, the demand increased from negative 13.7% to 19.8%.

The main reason steel has been booming is because many steel companies are witnessing big profit margins as demand is more and therefore, they can charge more.

Due to prices in global markets being much higher than the domestic markets, Indian steel producers have benefitted a lot from exporting steel abroad.

However, this is also causing decrease in supply in domestic markets.

Also, Indian companies are able to get comparatively cheaper raw materials, like coking coal, especially from Australia.

Many companies are able to make profit because they own iron ore or have access to cheap iron ores which is required for steel production.

Note that steel plants have also increased liquid oxygen to cater to the needs of the Covid-19 patients in India.

In the non - ferrous metals, copper, aluminium and nickel are at their best prices.

Demand is increasing mainly because of the electric vehicles (EVs) and green energy projects.

The budget has also been favourable for the infrastructure sector in India, which has helped boost metal prices, especially steel.

How the JSW Steel Stock has Performed

The stock is up over 12.5% in the last month and over 307.8% in the last year.

Yesterday, shares of JSW Steel closed at Rs 697.8 (up 0.5%) on the BSE and Rs 698.2 (up 0.5%) on the NSE.

The share touched its 52-week high of Rs 773 and 52-week low of Rs 163.6 on 10 May 2021 and 10 May 2020, respectively.

At its current price, it is trading at a P/E ratio of 42.8.

About JSW Steel

JSW Steel, the flagship company of the JSW group is an integrated steel manufacturer in India with an installed steel-making capacity of 18 million tons per annum (MTPA).

The company offers the entire gamut of steel products - hot rolled, cold rolled, galvanized galvalume, pre-painted galvanised, pre-painted galvalume, TMT rebars wire rods and special steel bars rounds & blooms.

It is one of the fastest growing companies in India with a global footprint in over 140 countries.

After the merger of ISPAT steel, JSW Steel has become India's second largest private sector steel company.

A US$ 15 bn conglomerate, with presence across India, USA, South America and Africa, the JSW group is a part of the O.P. Jindal group with strong footprints across core economic sectors, namely, steel, energy, infrastructure, cement, ventures and sports.

For more details about the company, you can have a look at JSW Steel factsheet and quarterly results on our website.

You can also compare JSW Steel with its peers.

JSW Steel vs Tata Steel

JSW Steel vs SAIL

JSW Steel vs Jindal Steel

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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