Citi has maintained its sell rating on JSW Steel, assigning a target price of ₹915, even as the company approved a major restructuring involving Bhushan Power & Steel (BPSL). The brokerage said the new structure will meaningfully reduce leverage for the steelmaker but does not offer enough upside to justify a rating change at the current market price of ₹1,144.
JSW Steel’s board has approved the divestment of a 50% stake in BPSL for an effective enterprise value of ₹531 billion, alongside the amalgamation of Piombino Steel — the entity owning BPSL — into JSW Steel. Citi noted that this implies an EV/EBITDA multiple of 10x for BPSL, assuming EBITDA per tonne of ₹12,000 at full utilisation of its 4.5 mtpa capacity. The brokerage pointed out that this valuation is slightly above JSW Steel’s own trading multiple of approximately 9x.
Post-transaction, BPSL will be deconsolidated from JSW Steel’s balance sheet. Citi highlighted that this will bring down the company’s consolidated net debt-to-LTM EBITDA from the current 3.0x to 1.7x, marking a sizeable improvement in leverage. However, the brokerage believes the restructuring does not materially alter JSW Steel’s near-term earnings outlook to warrant a re-rating.
Citi maintained that despite the cleaner balance sheet, the stock does not offer a favourable risk–reward profile at current levels. The brokerage thus reaffirmed its sell stance with a target price of ₹915.
Disclaimer: This article is for news reporting purposes only. It is based solely on the inputs provided and does not constitute investment advice or stock recommendations.
