Jindal Steel And Power Q4 Results Review - Near Term Hiccups In Volume Growth: Prabhudas Lilladher

Prabhudas Lilladher Report

Jindal Steel and Power Ltd. reported largely in-line cons. operating performance in Q4, despite weak net sales realisation (-5% QoQ) in standalone business which got offset by higher volumes (11% QoQ) aided by export volumes.

Average Q1 coking coal cost expected to decline by ~$30-40/tonne QoQ while ramping up of pellet plant to drive margins. Although near term volume growth depends upon timely commissioning of BF-II, we expect delays of few months due to external events.

Rashtriya Ispat Nigam Ltd. joint venture was expected to supply feedstock for hot strip mill to improve product mix in H1; however ongoing crisis led by worker’s strike at Gangavaram port is causing delays.

JSPL is well poised to take dual benefit of volume growth and improvement in product mix in the long term. Incremental volumes from pellet plant, conversion of semis at HSM and cost savings from captive coal mines would contribute to Ebitda margins by FY26E.

We increase FY25/26E Ebitda by 5%/8% respectively to incorporate rising long product prices and expect revenue/Ebitda/profit after tax compound annual growth rate of 17%/30%/28% over FY24-26E.

At current market price, the stock is trading at 7.7 times/5.7 times enterprise value of FY25E/FY26E Ebitda which appear full.

We downgrade the stock to ‘Accumulate’ from ‘Buy’ earlier with revised target price of Rs 987 (earlier Rs 980) valuing at six times EV of March-26E Ebitda and await better entry point.

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