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* Sales volumes grew 6% YoY to 1.8mt (in line with our estimate of 1.9mt) and exports stood at 10% of total sales.

* Revenue grew 4% YoY at INR126b, in line with our estimate of INR129b. ASP rose by INR2,034/t YoY to INR68,415/t, below our estimate of INR66,381/t.

* EBITDA declined 24% YoY to INR26b, 16% above our estimate of INR23b. The beat was led by lower input costs, partially offset by higher other expenses. EBITDA/t stood at INR14,283 vs. estimate of INR11,653.

* APAT improved 15% YoY to INR17b (our estimate INR9b), aided by lower finance costs and depreciation, strong operating performance and negligible tax outgo.

* Net debt stood at INR68b (down ~INR1.4b QoQ) and the net debt-to-EBITDA ratio stood at a comfortable level of 0.75x and D/E ratio was 0.3x.

Signing of coal mining lease

* During the quarter, JSP signed mining lease for Gare Palma IV/6 and Utkal C, with total R&R of 294mt.

* EC for these mines is 7.37PRC p.a. and the mines are expected to commence in the next couple of quarters. Once operational, it will reduce JSP’s dependence on the import of coal and merchant miners.

Highlights from the management commentary

* After the expansion, the total crude steel capacity is expected to reach 15.9mt by FY25E and pellet capacity to 21mt by FY24E.

* JSP has elongated its capex implementation timeline by few quarters and now expects the entire capex to be completed by 4QFY25.

* While there is no guidance for FY24 volumes, the company is seeing strong demand in the domestic market. JSP expects volumes to pick up in FY24 amid increased government spending.

* The cost of coking coal h increased in 1QFY24, offset by low iron ore costs

Valuation and view

* The 1Q performance was stronger than estimates, driven by low input costs, low interest expenses, low depreciation, high other income and negligible tax outgo.

* Once the pellet plant and coal block are fully operational, they could give strong benefits, which would materially flow from FY24-end onward.

* Considering the 1Q performance and a robust demand outlook, we raise our EBITDA/APAT estimates by 4%/16% for FY24 and by 8%/9% for FY25.

* We maintain our BUY rating on JSP with a revised TP of INR790, based on 5.5x FY25E EV/EBITDA. We believe JSP’s focused approach on deleveraging, along with capacity and margin expansion initiatives, augurs well for the company.

* The stock is currently trading at 4.9x FY25E EV/EBTIDA and 1.4x FY25E P/B.

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