Accumulate Jindal Steel and Power Ltd For Target Rs. 991 By Elara Capital
Volume surprises on the positive
Jindal Steel and Power (JSP IN) Q4FY25 adjusted EBITDA stood at ~INR 24.8bn, ahead of our estimates of ~INR 22.3bn. Around 16% QoQ EBITDA growth was aided by robust volume growth of ~12% QoQ. Net debt declined to ~INR 119bn vs ~INR 136bn as on end-Q3FY24, led by ~INR 27bn QoQ reduction in working capital. As a result, net debt/EBITDA improved to ~1.3x vs 1.4x in Q3FY25. We expect healthy steel prices, up 6-7%, and lower coking coal cost (consumption cost down USD 10-15 per tonne) to support near-term margin. In the long term, successful completion of capacity and margin expansion projects and improved product mix will be key margin expansion triggers. Thus, we reiterate Accumulate with a TP of INR 991.
Higher volume cushions margin: Consolidated sales volume rose ~6% YoY and ~12% QoQ to ~2.1mn tonne, ~8% ahead of estimates, aided by higher production and inventory liquidation. Realization dipped ~8% YoY but was flat QoQ at INR 61,893/tonne. Operating cost declined ~8% YoY and ~1% QoQ to INR 50,241/tonne, driven by lower coking coal prices. Realization and operating cost were broadly in line with estimates. Consequently, EBITDA/tonne fell ~7% YoY but rose ~4% QoQ to INR 11,651 vs our estimate of INR 11,314.
Product mix to skewed toward flat steel: The share of flat steel rose to 42% in Q4FY25 vs 37% in Q4FY24 while it was 43% in FY25 vs 32% in FY24. As per management, JSP’s product mix is likely to shift meaningfully toward flat steel post completion of all projects with flat steel’s share rising 70% vs 43% in FY25.
BF-2 to come on-stream in Q1FY26. The first hot metal output from blast furnace (BF)-2 at its Odisha-based Angul plant is likely in Q1FY26. Also, basic oxygen furnace-2 at the same site is likely to be commissioned in Q2FY26. On the raw materials front, JSP has received mine opening permission for Utkal B1 coal mine in Odisha, which has a total reserve of ~148mn tonne and annual environmental clearance limit of 5.5mn tonne. This mine is set to start operations in H1FY26. Further, JSP has also secured Odisha-based Saradhapur Jalatap East coal block.
Retain Accumulate with a TP of INR 991: We expect lower coking coal prices, healthy steel prices and lower imports due to safeguard duty should support near-term performance. In the long run, phase-wise completion of announced capacity expansion projects, rising share of captive coal consumption and several cost savings measures would enable the company to keep a check on margin. Further, a healthy balance sheet with the lowest debt vs major peers despite ongoing capex is a key positive. Therefore, we reiterate Accumulate with a TP of INR 991. We retain our EBITDA estimates for FY26-27 and introduce FY28 estimates. We ascribe 6.0x March 2027E EV/EBITDA to the standalone business and 4.0x March 2027E EV/EBITDA to other business. Increased imports of low-cost material from China and other countries, unprecedented rise in coking coal & iron ore prices, and demand slowdown from key end-user industries are key risks to our call.
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SEBI Registration number is INH000000933
