Paweł Puchalski, an analyst from Santander brokerage house, has clearly lowered the target valuation of the mining company’s shares in his recommendation dated September 4, down to PLN 7, compared to PLN 24 at the beginning of today’s trading session. The analyst sees unfavourable changes for JSW in China.
JSW wants to build nuclear. It proposes a key raw material
Jastrzębska Spółka Węgla plans to participate in the process of building nuclear power plants in Poland. JSW wants to supply coking coal, which will be used to produce steel necessary for the construction of nuclear power plants.
Bad news from Asia
As Paweł Puchalski emphasizes in the recommendation, the Chinese steel segment is facing a huge decline, as indicated by the largest local steel producer Baowu. With the decreasing probability of the La Nina climate phenomenon, hard coal prices have fallen below USD 200/t. Paweł Puchalski calculates that this may result in a decrease in EBITDA in Q3/Q4 2024, which will amount to only PLN 0.3 billion. This will mean the need to “burn cash” in the amount of PLN 0.5 billion. – All this with an optimistic assumption of an increase in coal production in the second half of 2024. For several months, the new management has not presented plans for restructuring operating costs, and time (and hard coal prices) are against JSW – emphasizes the analyst.
Not the best result forecasts
The analyst’s estimate of the value of a single share of the company at PLN 7 is over 71 percent less than it was quoted at the close of trading last Friday. At this valuation, the entire company would be worth PLN 822 million.
Santander analyst predicts that this year the company will achieve PLN 12.1 billion in revenue and PLN 1.25 billion in EBITDA (operating profit plus depreciation and amortization). However, the forecast net loss is as much as PLN 2.29 billion, and for 2025 — PLN 1.2 billion. This is to be the effect of, among other things, a drop in coking coal prices by USD 50 per tonne in just one month, below USD 200.
