JSW Steel hits new high; market-cap nears Rs 1-trillion

Shares of JSW Steel hit a new high of Rs 409, up 2%, extending its Wednesday’s 9% surge on the National Stock Exchange (NSE), after the announcement of its entry in Nifty 50 index from September 28.

According to a press release on Tuesday, the steelmaker will replace pharmaceutical firm Lupin in the benchmark Nifty, with effect from September 28. The inclusion of JSW Steel is expected to boost the steelmaker’s stock, given that several exchange-traded funds (ETFs) track the Nifty index.

JSW Steel has rallied 29% after the company reported a robust 275% year on year (YoY) growth in its consolidated net profit at Rs 23.39 billion for June quarter (Q1FY19). In comparison, the Nifty 50 index was up 5% since July 24, 2018.

Indian witnessed a robust 9.2% YoY growth in domestic steel demand for the first quarter led by robust government spend on infrastructure and strong consumer demand. Consequently, the Company strategically increased domestic sales by 27% YoY, which aided consolidated sales volumes increasing by 11% YoY to 3.76 million tonnes, JSW Steel said in a statement.

JSW Steel is set to join the elite club of companies that have a market capitalisation (market-cap) of over Rs 1 trillion after a sharp rally in the market price of the company.

With Rs 983.44 billion market-cap at 11:39 am; JSW Steel was less than 2% or Rs 16.56 billion to hit Rs 1-trillion market-cap.

Currently, JSW Steel stands at number 33 positions in overall market-cap ranking, the BSE data shows. It was at number 41 rank before the announcement of Q1FY19 results. The company surpassed eight companies – Godrej Consumer Products, YES Bank, Bharat Petroleum Corporation (BPCL), GAIL (India), Tata Motors, Adani Ports and Special Economic Zone, Vedanta and Britannia Industries - during the period.

JSW Steel has acquired a few assets in the US (1.5mtpa HRC capacity at Acero at EV of USD182 million) and Italy (1.3mtpa rolling mill at Aferpi for EUR 55 million) at low cost. It has charted a plan to invest USD 1 billion in the US to scale up the EAF route crude steel capacity of Acero and its old plate & pipe mill to 4mtpa in order to leverage from trade restrictions and oversupply of scrap locally.

“Although JSW Steel is yet to demonstrate its execution skills in that country, it is a good bet given that initial investment is low and capex is staggered. There is a high probability of a positive surprise. Monnet Ispat, too, will eventually be merged. It is an attractive addition of 1.5 mtpa capacity at the valuations mentioned in media. Organic growth of 6.7mtpa at Dolvi and Vijaynagar will give a boost to volumes in FY21. We see a very strong growth outlook for the company,” the brokerage firm Motilal Oswal Securities said in result update.