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JSW Steel shares rise 36% from 52-week low; more upside likely?

JSW Steel shares rise 36% from 52-week low; more upside likely?

JSW Steel share price today: Shares of JSW Steel trade at Rs 708.10 against the yearly low of Rs 520.10 hit on May 26, 2022, implying a gain of 36.19% during the period

The rally in the JSW Steel stock can be attributed to a growth in healthy steel demand globally as well as domestically during the first half of FY23 The rally in the JSW Steel stock can be attributed to a growth in healthy steel demand globally as well as domestically during the first half of FY23

Shares of JSW Steel have surged over 36% from their 52-week low in nearly six months. Currently, the shares of JSW Steel trade at Rs 708.10 against the yearly low of Rs 520.10 hit on May 26, 2022, implying a gain of 36.19% during the period. The rally in the JSW Steel stock can be attributed to a growth in healthy steel demand globally as well as domestically during FY23. 

A strong recovery in the Indian market since May-end has also led to positive sentiment around the stock. The 30-stock Sensex has surged 13.73% or 7,451 points since May 26 this year.  Similarly, the BSE metal index has climbed 12% or 2124 points from 17,751 on May 26 to 19,875 in the current session.  

JSW Steel stock has emerged as the top gainer in the metal pack since May 26, 2022.  

While Jindal Steel stock managed to gain 30% or Rs 118, Tata Steel stock has remained flat during the period. It stood at Rs 105.19 on May 26 against Rs 105.85 in the current trading session.  Similarly, shares of SAIL have surged 11% or by Rs 8 during the period.  

However, JSW Steel reported a weak set of earnings in the last two quarters of the current fiscal.  

Also Read: Tata Steel, JSW Steel, Hindalco among top Nifty losers on profit-booking, weak outlook

JSW Steel’s net profit plunged as much as 85.8 per cent year-on-year to Rs 838 crore in Q1 of this fiscal on the back of adverse impact of falling global prices and imposition of 15 per cent duty on steel exports. The company had logged a net profit of Rs 5,904 crore in the year-ago period. Sequentially, profit fell 74.4 per cent from Rs 3,234 crore in the March quarter. 

However, revenue from operations rose 31.7 per cent to Rs 38,086 crore in the June quarter compared with Rs 28,900 crore in the previous fiscal. 

In the second quarter of the current fiscal, JSW Steel logged a loss of Rs 848 crore against Rs 7,170 crore profit in the corresponding quarter of the previous fiscal.  

Net sales, however, gained 28.54% to Rs 41,778 crore in Q2 against Rs 32,503 crore in the same quarter of the previous fiscal.

Here’s a look at what analysts said about the prospects of the JSW Steel stock post 36% rise from its 52-week low.  

Commenting on the JSW steel stock, Jitendra Upadhyay, senior Equity Research Analyst at Bonanza Portfolio said, "To fulfil and meet the unseen demand of the future, company is aggressively adding capacity across its different facilities like downstream projects, presently produces a total capacity of 28.5 MT across its 14 manufacturing plants and 4 downstream facilities and aims to make it 37.5 MT by 2025 and 45 MT by FY30. Overseas market is doing well; cool off in raw material prices have led to a good recovery in the JSW Steel stock. Considering limited room for upside due to higher valuation, uncertainty on export volume front due to higher export duties, higher capex, surplus capacity and higher debt is seen in their balance sheet."

Manoj Dalmia, founder and director, Proficient Equities said, “Investors can avoid buying heavily in metals as they are subjective to global macro conditions which are still unstable.” 

Also Read: JSW Steel shares gain despite weak Q2 earnings, here's why

“The Nifty metal index is at 6461 level and has been rising recently. The same can be ascertained due to a rally in its components. JSW Steel can face some selling pressure after this rally and one can expect a small retracement till Rs 678. Investors can avoid buying heavily in metals as they are subjective to global macro conditions which are still unstable,” added Dalmia.  

Anand James, Chief Market Strategist at Geojit Financial Services said, "While metals have been pricing in dollar weakness, commodity stocks in general have been rising lately, backed by optimism from China on account of relaxation in covid restrictions as well as revival possibilities in the property sector. The consolidation breakout that has ensued in JSW Steel looks to have set up the stock for a multi month uptrend aiming 940, but such prospects shall face immediate challenge at 780 which is near the upper band of the descending broadening wedge pattern."

Girish Sodani, Head of Equity Market at Swastika Investmart has assigned a BUY call on the stock and can be bought for a target of  Rs 825-900 levels in the medium term.  

"In spite of the challenging global economic scenario, we expect healthy steel demand growth internationally as well as domestically during FY23, which along with the flow through lower raw material prices, should aid the performance of steel and iron based companies. The major reason behind our economic growth as well as the strong demand trends in the real estate sector and recovery in the automobile sector has helped stocks like JSW Steel in the last one quarter," said Sodani.  

"The firm reported negative results in Q2 but a high jump of 29% in revenue. The company believes on saleable steel sales were 28% higher sequentially at 5.74 million tonnes on the back of higher domestic sales. JSW steel reported subdued realisation during the quarter. JSW Steel has been the fastest-growing company in the Indian steel sector with capacity and volume growth of 10.3%/9.5% CAGR over the past 11 years. The company has the lowest conversion cost within India and scores very high compared to global peers as well. We currently have a BUY rating on the stock. It looks attractive for a target of 825-900 levels in mid-term," added Sodani.  

 Abhijeet from Tips2trade said, "A strong recovery in Indian markets aided by easing inflation has led to a bounce back especially in metal stocks including JSW Steel. Currently, JSW Steel charts look slightly negative and investors are advised to book profits at current levels. Till daily close above 732 is not achieved, a fall till 680-670 looks very likely."