Maintain 'Sell' on JSW Steel with target of Rs 1050 per share: Religare

MUMBAI: Religare Securities is of the view that the acquisition will not be value accretive to JSW Steel unless it manages a sharp turnaround in the operating performance of Ispat.

“We believe that JSW’s acquisition of 41% stake in Ispat for Rs 21.5 billion will not be value accretive to JSW unless it is able to make a sharp turnaround in the operating performance of ISPAT.

In our view, current EBITDA/ton has to improve from $70 per ton currently to $120 per ton to be earnings accretive. We believe that it will be a Herculean effort to do this given that ISPAT sources all its raw materials from external sources.

In our view, the acquisition could at best be avoided and the cash in the balance sheet could be better used for meeting JSW’s own capex requirements and for acquiring raw material assets.

We maintain our SELL rating with a target of Rs 1,050/share,” the report said.