Why JSW Steel Share Price is Rising

Indian share markets have scaled record peaks in recent sessions. June 2023 was the fourth consecutive month where Indian markets closed with monthly gains.

Be it smallcaps, midcaps or largecaps, fundamentally strong companies from these segments have proved their worth.

A recent report showed that around 400 stocks from the midcap and smallcap segments gave double-digit returns in the month of June.

What about largecaps? JSW Steel has been an outlier, rising for consecutive sessions.

In the past one month, the stock has rallied around 12% while in the past one year, shares of the company have surged over 35%.

Let's take a look at the factors driving the rally and how the long-term growth prospects look for the Indian steel giant.

Why JSW Steel share is rising

#1 Above estimate results

For the fourth quarter ended March 2023, the steel manufacturing company registered an 11.9% year-on-year (YoY) rise in its consolidated net profit at Rs 37.4 billion (bn).

The company's revenue during the same time grew around 20% to Rs 469.6 bn.

During the quarter under review, higher raw material, power and fuel costs hurt the company's margin as it shrank to 17% from last year's 19.5%.

Still, these numbers were better than what the street was expecting and that could be one reason why shares of JSW Steel have remained upbeat ever since its Q4 result declaration.

The company's management said coking coal prices have corrected sharply in the last couple of months. It can show the effect in profits staring the second quarter of FY24.

#2 Order wins

The other reason why shares of JSW Steel have been rising in recent weeks is because the company was declared the preferred bidder for iron ore in two blocks in Goa.

The two blocks VI- Cudnem-Cormolem Mineral Block and IX-Surla-Sonshi Mineral Block have projected iron ore resources of 9.77 MMT and 65.73 MMT, respectively.

JSW Steel has offered 96.7% of the value of mineral dispatched for the first and 109.8% of the value for the second one.

#3 Huge capex and robust demand

Those could be the two reasons driving the current rally. But if you were to analyse it from a long term perspective, JSW Steel shares are on the rise ever since it announced a huge capex for the current year.

For FY24, JSW Steel has planned a capex of around Rs 190 bn mainly for the Vijayanagar facility, BPSL phase II expansion, new mines, and enhancement of downstream capacities.

The company is expecting the share of value-add products to be in the range of 55-60% and has taken such a big capex to enhance the volume, which will resultantly improve margins.

Over the past three years, JSW Steel has ramped-up its capacities to become one of the leading steelmakers in India. People always compared behemoths with Tata Steel when it came to steel but now, JSW has earned the same brand image.

Further, industry experts are of the view that domestic steel demand is robust across the sectors, driven by constructions and railways.

The Indian government has earmarked big projections for the railway sector and steel demand will mainly remain intact for a long time to come.

India's domestic steel demand is estimated to grow annually by 7.5% to reach 128.85 million tonnes (mt) in 2024. Even the other steel consumption driven sector - auto - is seeing strong demand across segments.

Moreover, JSW Steel is committed to reduce its emissions. It accounts for around 12% of total carbon dioxide emissions in India.

JSW Steel plans on reducing its carbon emission by 42% by 2029-30. This is in line with India's goal that India's top renewable energy companies are already working on extensively.

How JSW Steel share price has performed recently

In the past 5 days, JSW Steel shares are up 6%. In the past one month, shares of the company have gained 12% while in the past one year, JSW Steel is up 42%.

JSW Steel has a 52-week high of Rs 791 touched recently and a 52-week low of Rs 541 touched in July last year.

Interestingly, promoters of the company have shown skin in the game and consistently bought shares from the open market.

Same with financial institutions and insurance companies, that have raised their stakes from 4.7% to around 7.7% in the past eight quarters.

To know more, check out JSW Steel's latest shareholding pattern.

About JSW Steel

JSW Steel is an Indian multinational steel-making company based in Mumbai and a part of the JSW Group.

After the merger of ISPAT Steel, JSW Steel became India's second-largest private sector steel company. The company is the owner of single largest steel plant in India.

To know more about the company check out its factsheet and quarterly results.

Also check out the detailed comparison article between JSW Steel and Tata Steel.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...