MUMBAI: JSW Steel has impressed the Street with its better-than-expected fiscal fourth quarter (Q4) earnings performance.

Net sales in the March quarter rose 60% on year while standalone Ebitda surged 149%, driven by sharp improvement in realisations which were better than expectations. Rising domestic steel prices helped. Analysts at Phillip Capital Institutional Equity Research in a note said that blended realisations at Rs59,096 per tonne grew 46% year-on-year (YoY) and 22% sequentially (6?tter than estimates). The beat in realisations was aided by a better mix (rising value-added products sales and export sales). Higher realisations also drove margin outperformance. Ebitda/tonne at the standalone level was at Rs19,756, up 127% YoY and 37% sequentially. Notably, this was Rs1,000 per tonne better than expectations.

Helped by strong demand, the company saw standalone sales volumes climb 10% on year to 4.06 million tonnes, which was up 4% sequntially. Not surprising that with realisations beating expectations adjusted net profit rose a massive 270% on year.

At the consolidated level too (including international operations), net sales and Ebitda surged 51% and 184% year-on-year respectively. Consolidated Ebitda per tonne was at Rs20,788, up 155% YoY.

Going ahead, outlook remains strong with steel prices expected to improve. Domestic demand though may see some impact in the June quarter looking at the second wave of the pandemic. Nevertheless, the company’s ability to boost exports remains a key positive and can drive June quarter volumes. Ongoing expansions will also likely benefit JSW Steel, with FY22 volumes likely to be driven by new capacities at Dolvi ( 5 MTPA) getting commissioned.

JSW Steel expects FY22 standalone sales at 17.4 million tonne, including 1.5 million tonne from the new Dolvi plant. At the group level, the acquired Monnet Ispat and Bhushan Steel's assets will push up sales to 21.63 million tonne.

The recent announcement of 5 million tonne brownfield capacity expansion at Vijayanagar and the acquisition of Bhushan Power and Steel provides long-term growth visibility, said analysts at Elara Securities Private Limited

The company, however, will need to keep a tab on costs given its significant dependence on external iron ore and coal supplies. While a favourable product mix and continued upward trend in steel prices supported margins, higher prices of iron ore, coal and natural gas offset the impact. Iron ore from captive mines in the fourth quarter constituted 42% of the total requirement.

Dolvi Phase II commissioning and BPSL acquisition allowed JSPL to reclaim top spot in domestic steel industry, said analysts at Philip Capital. They expect the volume-driven growth story to continue for the next couple of years which coupled with higher prices will translate into strong cash flows.

While most analysts remain bullish, uncertainties around the impact of lockdown and recent efforts by China to control steel prices may keep the Street anxious. The stock was volatile in Monday's trade, with losses of more than 3% in early deals.