JSW Steel shares shed multibagger tag; time to buy, sell or hold?

Shares of steel-maker JSW Steel have shed multibagger tag since the last three years, making investors jittery about the prospects of the large cap stock. JSW Steel stock has delivered 276% and 132% returns for its shareholders in the last three and five years, respectively. In comparison, key peer Tata Steel shares clocked 253% and 81% returns during the last three and five years, respectively.

On the other hand, shares of JSW Steel have lost 13.43% this year and declined 4.56% since the beginning of this year. In the last two years, JSW Steel shares have surged 50%, taking shine off the returns from three and five years.

In the current trading session, shares of JSW Steel were trading 0.21% lower at Rs 663.70 today against the previous close of Rs 665.10 on BSE. Total 0.14 lakh shares of the firm changed hands amounting to a turnover of Rs 94.70 lakh on BSE. Market cap of JSW Steel fell to Rs 1.60 lakh crore.

In terms of technicals, the relative strength index (RSI) of JSW Steel stands at 38.1, signaling it's neither oversold nor overbought. JSW Steel stock has a one-year beta of 1.1, indicating high volatility during the period. JSW Steel shares were trading lower than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

The steel major logged a 89% fall in net profit to Rs 490 crore in the third quarter against a profit of Rs 4,357 crore in the last year period. Revenue from operations grew 2% year-on-year to Rs 39,134 crore as against Rs 38,017 crore reported in the corresponding period of last year. JSW Steel logged its combined crude steel production at 6.24 million tonne for the third quarter, showing a growth of 17% year-on-year.

Here’s a look at what analysts said on the outlook of the JSW Steel stock.

Abhijeet from Tips2trade said, "JSW Steel looks bearish on the Daily charts with strong resistance at Rs 680. A close below support of Rs 649 could lead to targets of Rs 636-624 in the near term."

Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said, "After a strong correction from the 52-week high, JSW Steel is now trading below the 200 DMA and making higher lows and lower lows on the daily chart. Since last week, it is trading in the narrow range of Rs 650-680 and forming an inside bar pattern. There is a support around Rs 640 levels, which is the lower end of the channel pattern and a resistance close to the 200 DMA (673 level). A decisive move past the 200 DMA would improve the bias and allow for anticipation of further upward movement towards the Rs 700 level."

Morgan Stanley has an underweight stance on the stock with a target price of Rs 545. “ Demand was muted and there was excess inventory in February. The export market remains dull. Overall, FY23 domestic production guidance of 23.6 mnt appears achievable,” said the MNC financial services firm.

Sneha Seth, Derivatives Research Analyst, Angel One said, “JSW Steel is one of the strongest candidates if compared to its peers. Lately, we are witnessing a rangebound move of merely 45-50 points for the last couple of weeks now. Technically, the overall chart structure remains bullish, there is higher top higher bottom formation, and it is also trading close to the rising trend line support placed around Rs 690-695 odd zone. On the upside, any sustainable move beyond Rs 735-740 odd zone should trigger fresh buying interest, which can bring it towards record highs.”

Motilal Oswal has assigned a neutral rating to the stock with a price target of Rs 710.

"JSW Steel core operations (standalone business) are expected to post a crude steel production of 23.6 million tonne and sales of 22.6 million tonne in FY23. JSW Steel expects export volumes to rise to mid double digits in FY24. While JSW Steel is well placed, the stock trades at 5.8x FY24E EV/EBITDA and appears to be fully discounting the benefits. We reiterate our Neutral rating on the stock with a target price of Rs 710 (6x FY24E EV/EBITDA," said the financial services firm.

Rajesh Sinha, Sr. Research Analyst at Bonanza Portfolio said, "Export duty was removed on 19th November 2022, which helped the Indian steel manufacturer to be more competitive globally. Infra / Construction as well as Capital goods continued to improve demand of steel going ahead. India’s Crude steel production improved by 4.5% QoQ to 31.39mt whereas steel imports improved by 46% QoQ and 101.8%YoY, but steel export declined by 26%QoQ and 64.7% YoY. HRC Prices have cooled down and currently at 68% of March 2022 level at 1,056 Chinese Yuan Renminbi (CNY)/MT and improved by 41% from December 2022 level which was 744 CYN/MT. Our view on JSW Steel is neutral as it will take at least one more quarter to get some improvement in demand of steel globally which will lead to improvement in profit margins of JSW Steel going forward."

Abhijeet Bora, DVP Research Analyst at Sharekhan by BNP Paribas said, “We believe that earnings downgrade cycle is largely over for steel companies and a recent recovery in steel price would drive gradual margin/earnings improvement for steelmakers. Having said that, we believe situation for steel players is wait and watch as steel margin upcycle (as seen in 2020-2021) is still not clearly visible given demand concern in US/Europe and concern of elevated coking coal price. Hence, we have a reduce rating on JSW Steel with price target of Rs 620 as valuation of 8.2x FY24E EV/EBITDA seems rich as compared to the historical average of 6.5x and we expect net debt (stood at Rs 69,498 crore as of December 2022) to remain high given the company’s capex plan.”

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