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Multiple margin levers

Performance above expectations

Jindal Steel and Power’s(JSP IN) Q4 consolidated net sales dipped ~1% YoY but grew ~15% QoQ to ~INR 135bn, above our/Consensus estimates of ~INR 116bn/117bn, respectively. Adjusted for forex loss of INR 680mn, EBITDA rose ~12% YoY but fell ~ 10% QoQ to ~INR 25bn, above our/Consensus estimates of ~INR 22.5bn/23.7bn, respectively. Adjusted PAT surged ~60% YoY but fell ~48% QoQ to ~INR 9.9bn. Consolidated net debt rose to ~INR 112bn as of end-March 2024 versus ~INR 91.2bn as of end-December 2023 and ~INR 69.5bn as of end-March 2023.

EBITDA/tonne up ~16% YoY but down ~17% QoQ

Sales volume fell ~1% YoY but grew ~11% QoQ to 2.01mn tonnes. QoQ volume growth was primarily led by higher exports – The export share rose to ~11% in Q4FY24 from ~3% in Q3FY24. Standalone realization was up ~4% YoY and ~8% QoQ to INR 68,524/tonne. Standalone operating cost rose ~2% YoY and ~15% QoQ to INR 56,081/tonne. Realization and cost were inflated by sale of material to Rashtriya Ispat Nigam (RINL) as per JSP’s MoU with RINL. Steel realization was down ~5% QoQ. So, standalone EBITDA/tonne surged ~16% YoY but contracted ~17% QoQ to INR 12,444, ahead of our estimates of INR 11,569.

Valuation: Reiterate Accumulate, TP raised to INR 1,074

In the past two months, prices of long products have increased by ~12% and are currently at a premium to hot rolled coil (HRC) prices, which bodes well for JSP’s margin. Also, improved product mix, reduced semis sales (recently, hot strip mill started operations) and multiple cost levers (savings from captive coal mines, falling coking coal price and start of the slurry pipeline) bode well for future margin. Phase-wise completion of the announced capacity expansion may prop long-term volume growth. So, we remain positive on JSP and reiterate Accumulate. We raise EBITDA estimates ~1% for FY25E and ~6% for FY26E. Also, we raise our target multiple from 5.5x to 6.5x given the increase in earnings visibility. We roll over to March 2026E from December 2025E and raise TP to INR 1,074 from INR 860, on 6.5x March 2026E EV/EBITDA.

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