After months of dynamic boom, shares of mining tycoon JSW fell by almost a half in just two months. We asked the analyst what was behind it and the conclusions can be drawn from it for the assessment of the global economic situation.
Already by over 40 percent JSW shares have fallen cheaper on the Warsaw Stock Exchange since the peak of just two months ago. After the previous months were marked by a dynamic boom in the mining company’s papers, at Tuesday’s close the rate was slightly below PLN 36 and this year it was only 38% up.
According to Antoni Kania, an analyst at mBank’s brokerage house, JSW’s quotations are the most hit by the company’s problems, including lower coal production. Subsequently, JSW is also harmed by concerns about the worsening of the economic situation and inflation of labor costs.
“In November, the management board lowered this year’s coal mining target to 13.8 million tons, although, based on the company’s current strategy, investors expected it to be around 15 million tons”, the specialist notes.
This would mean that Q4 will be the best quarter in terms of production this year. However, this casts a shadow over the years to come, as it calls into question the company’s ability to meet its expectations. This is just one of its problems, because JSW was already damaged by frequent changes of CEOs and geological problems translating into higher mining costs. At the same time, investors’ doubts as to the quality of management translate into a clearly lower valuation of JSW compared to similar foreign companies.