JSW Steel downgraded to 'Sell' by MarketsMOJO due to high debt and negative results

JSW Steel, a largecap company in the steel/sponge iron/pig iron industry, has recently been downgraded to a 'Sell' by MarketsMOJO on October 23, 2024. This decision was based on several factors, including the company's high debt to EBITDA ratio of 2.73 times, which indicates a low ability to service debt. Additionally, the company has declared negative results for the last two consecutive quarters, with a significant decrease in net sales of -7.19% in June 2024.
Furthermore, the company's operating cash flow has been at its lowest at Rs 12,078.00 crore, and its operating profit to interest ratio is also at its lowest at 2.66 times. These financial indicators suggest that the company may struggle to meet its financial obligations in the near future.

On the technical side, the stock is currently in a mildly bullish range, with multiple factors such as MACD, KST, DOW, and OBV showing a bullish trend. However, the company's ROCE of 13.1 indicates a fair valuation with a 2 enterprise value to capital employed.

Despite the recent positive return of 27.62%, the stock is currently trading at a discount compared to its average historical valuations. Additionally, the company's PEG ratio of 0.9 suggests that its profits have not kept up with its stock price growth.

It is worth noting that JSW Steel has a high institutional holding of 36.7%, indicating that these investors have better capabilities and resources to analyze the company's fundamentals compared to retail investors.

With a market cap of Rs 2,36,964 crore, JSW Steel is the largest company in the sector, constituting 23.59% of the entire industry. Its annual sales of Rs 175,736.00 crore also make up 22.50% of the industry. While these numbers may seem impressive, the recent downgrade by MarketsMOJO suggests that investors should approach the stock with caution and carefully consider all the factors before making any investment decisions.