JSW Infra buy recommendation

JSW Infra Share Price Drops 8% After Q1 Results: Is It a Good Buy? Here’s What Top Brokerages Recommend

JSW Infrastructure reported a significant drop in its consolidated net profit for Q1FY25, leading to an 8% decline in its share price. The company’s latest financial results show mixed performance, with a decrease in profit but an increase in revenue and EBITDA. Brokerages are divided on the stock’s future prospects, offering differing investment recommendations.

Key Points

1. Quarterly Financial Results:
   • Net Profit: JSW Infra’s consolidated net profit for Q1FY25 fell by 8% year-on-year (YoY) to ₹296.55 crore, down from ₹322.20 crore in Q1FY24.
   • Revenue: Revenue from operations increased by 15% YoY to ₹1,009.77 crore, up from ₹878.10 crore in the previous year.
   • EBITDA: The company’s EBITDA rose by 24% YoY to ₹609 crore, with an EBITDA margin of 55%.
2. Share Price Reaction:
   • On July 19, the share price of JSW Infra opened at ₹316.10, compared to the previous close of ₹336.30.
   • The stock dropped as much as 7.5% to ₹311 before partially recovering to trade 5.29% down at ₹318.50 around 10 am.

1. Brokerage Opinions:
   • Motilal Oswal Financial Services:
     • Recommendation: Maintains a “Buy” call with a target price of ₹390.
     • Adjustments: Marginally reduced APAT estimates by 4% and 2% for FY25 and FY26, respectively.
     • Growth Estimates: Projects a compound annual growth rate (CAGR) of 15% in volume, 22% in revenue, 26% in EBITDA, and 28% in APAT over FY24-26.
     • Future Outlook: Expects strong growth driven by JSW Infra’s plans to expand capacity to 400 MMT by 2030 from the current 170 MMT.
   • Kotak Institutional Equities:
     • Recommendation: Maintains a “Sell” call with a fair value of ₹215.
     • Concerns: Highlights sustained trends from Q4, including flat captive volumes, constrained EBITDA margins, and limited growth in non-captive volumes.
     • Volume Estimates: Reduced by 1%, maintaining a fair value of ₹215, implying nearly 18 times one-year forward EV/EBITDA.
     • Investment Challenges: Notes that while JSW Infra is investing in assets, the lack of large, scalable assets may delay its progress toward becoming a complete logistics solution provider.

Conclusion

JSW Infra’s Q1FY25 results reveal a complex picture: while revenue and EBITDA show positive growth, the decline in net profit and the subsequent drop in share price have raised concerns among investors. Brokerages are split on the stock’s future potential, with Motilal Oswal maintaining a bullish stance and Kotak expressing caution. Investors should weigh the company’s growth prospects and expansion plans against current financial performance and market conditions before making investment decisions.

FAQs

1. Why did JSW Infra’s share price fall sharply?
   • The share price dropped due to an 8% year-on-year decline in Q1FY25 net profit, despite an increase in revenue and EBITDA.
2. What were JSW Infra’s Q1FY25 financial highlights?
   • Net profit decreased to ₹296.55 crore, revenue increased to ₹1,009.77 crore, and EBITDA rose to ₹609 crore with a 55% margin.
3. What do brokerages say about JSW Infra’s stock?
   • Motilal Oswal: Maintains a “Buy” rating with a target price of ₹390, citing strong growth prospects and expansion plans.
   • Kotak Institutional Equities: Maintains a “Sell” rating with a fair value of ₹215, pointing to sustained negative trends and limited asset scalability.
4. What is the significance of the EBITDA margin?
   • The EBITDA margin of 55% indicates a strong operational efficiency, but the impact of declining net profit on overall financial health is a concern.
5. How do current stock levels compare to historical averages?
   • The stock is trading below its 5-day, 10-day, 20-day, 30-day, and 50-day simple moving averages (SMAs) but above its 100-day, 150-day, and 200-day SMAs.
6. What are the future growth prospects for JSW Infra?
   • JSW Infra plans to expand its capacity to 400 MMT by 2030 and is focusing on both organic and inorganic growth opportunities, which could support long-term growth despite current challenges.
7. What factors should investors consider before investing in JSW Infra?
   • Investors should consider the company’s expansion plans, financial health, broker recommendations, and overall market conditions before making investment decisions.

JSW Infra buy recommendation

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