Brokerages Divided On Jindal Steel & Power Post Q2 Earnings—Here's Why

Jindal Steel & Power Ltd. has seen its share of volatility in the recent quarter, with the second quarterly earnings revealing significant pressure.

The company reported a consolidated Ebitda of Rs 2,200 crore, in line with Street expectations. While its near-term outlook remains subdued, analysts are divided in their views.

Citi remains cautious on Jindal Steel, maintaining a 'sell' recommendation with a target price of Rs 850. The brokerage notes that while the company's earnings are expected to recover in the next quarter, the outlook for volume growth remains uncertain.

For the quarter ended September, JSPL's steel sales volumes fell 11% quarter-on-quarter to 1.85 million tons, driven largely by a maintenance shutdown at its Raigarh plant.

Citi is also concerned about the limited visibility on demand recovery, especially with Chinese steel production still in decline and imports to India rising sharply, signaling increased competition.

While Citi expects a rise in Ebitda per ton in the near term, it believes the stock is already pricing in a significant recovery. Citi also pointed to ongoing issues at the company's new hot strip mill in Angul, which is operating at just 40% utilisation.

Nuvama has a more positive stance on the steelmaker, with a 'buy' recommendation and a revised target price of Rs 1,139, down from Rs 1,185 earlier.

Nuvama acknowledges the near-term headwinds, including a drop in volumes in the second quarter, but sees the current weakness as a temporary phase. The brokerage expects the company's Ebitda per ton to rebound in the next quarter, driven by higher steel prices and a recovery in volumes as the impact of the maintenance shutdown fades.

Key to Nuvama’s positive outlook is Jindal Steel's expansion plans. The brokerage highlights the company's ongoing projects at Angul, where the 3.3 million tons per annum blast furnace and basic oxygen furnace are expected to come online by the final quarter of the current fiscal.

Nuvama also points to the ramp-up in the company's captive coal mining capacity, which is expected to reduce raw material costs and improve margins in the medium term.

The brokerage has lowered its fiscal 2025 and 2026 Ebitda estimates by 19% and 16%, respectively, to account for weaker steel prices and volumes. However, it remains optimistic about Jindal Steel's longer-term growth trajectory, particularly as the commissioning of its steel and coal projects progresses.

Both brokerages agree that steel prices are expected to recover in the second half of the fiscal, which should support profitability. Nuvama forecasts a recovery in steel prices in the third quarter, which could lift Ebitda. Citi also expects a marginal improvement in Ebitda, but is wary that any recovery in steel demand may be offset by global uncertainties, particularly in China.

• Revenue fell 8.5% to Rs 11,213 crore versus Rs 12,250 crore (Bloomberg estimate: Rs 11,937 crore).

• Ebitda decreased 3.7% to Rs 2,200 crore versus Rs 2,286 crore (Estimate: Rs 2,080 crore).

• Margin expanded 90 basis points to 19.6% versus 18.7% (Estimate: 17.4%).

• Net profit fell 38% to Rs 860.5 crore versus Rs 1,390 crore (Estimate: Rs 813 crore).