Rakesh Jhunjhunwala stock: Scrip hits 52-week low, drops 27% in one month; brokerage gives sell call—Here is why

This Rakesh Jhunjhunwala iron and steel stock hit a fresh 52-week low on Wednesday amid multiple triggers. The stock has declined over 15% in the past one week and gave a negative return of over 40% in this past one year as on May 25. This steel stock has been declining after the government revised export duties on select steel products.  

The government on Saturday had an export tax of 15% on select pig iron, flat-rolled products of iron or non-alloyed steel, bars and rods, and various flat-rolled products of stainless steel, triggering fall in metal stocks as Metal index corrected over 8% on Monday alone.  

Shares Steel Authority of India, one of the 34 stocks in billionaire investor Rakesh Jhunjhunwala, were further seen trading with weakness on Wednesday after Steel giant reported a 28 per cent fall in its consolidated net profit to Rs 2,478.82 crore for the fourth quarter ended March 2022. As per regulatory filing by SAIL, the company had clocked Rs 3,469.88 crore net profit during the January-March quarter of 2020-21.

Though the ace investor has reduced his position to below one per cent in the steel stock in the quarter ended March 2022, Jhunjhunwala still holds SAIL in his portfolio, as per stock analysis website trendlyne.com.  

As per the latest corporate shareholdings, Rakesh Jhunjhunwala and Associates publicly holds 34 stocks as on March 2022. The net worth of these stocks has been pegged over Rs 28,748.2 crore as on May 25.  

Meanwhile, brokerages have bearish rating on the counter with Kotak Securities tagging it in sell category.  
Saying that SAIL 4QFY22 EBITDA failed to meet its estimate, it is of the view that SAIL is worst-hit among peers from the recent imposition of export duty. It sees a sharp correction in margins in FY2023E on the back of lower steel prices, higher coking coal costs and also note a possibility of EBITDA loss in 2QFY23E.  

"With higher capex and lower margins, we see the end of deleveraging phase in FY2022. Maintain SELL on expensive valuations," it said.  
Kotak Securities, which feels that the stock is trading at premium valuation, mainatined a sell call on the scrip with revised fair value of Rs 55 (earlier 60).

Saying lower realisations, high coking coal cost likely to impact profitability, brokerage house JM Financial maintained Sell on SAIL. It believes with imposition of export duty on flat steel products, domestic steel prices are likely to see a correction which will impact SAIL further.  

Axis Securities downgraded the stock from Buy to Hold too. While the progress in volume growth is visible now, the brokerage sees multiple headwinds for the sector in the upcoming quarters, including higher coking coal consumption costs and imposition of export duty on steel.