Buy Jindal Stainless Ltd For Target Rs. 720 By JM Financial Services
In-line results; growth projects to drive earnings
JSL reported 4Q consol. EBITDA of INR10.6bn, in line with JMfe. EBITDA declined by 12% sequentially given lower realisations (-6% QoQ). Consequently, EBITDA/t declined by INR4k/t to ~INR16.5k/t in 4QFY25. Company witnessed sequential growth in sales volume to 643kt in 4QFY25 compared to 588kt in 3QFY25 given better domestic demand. Key takeaways from the call – a) volume growth guidance for FY26 at of 9-10% b) consol. EBITDA/t guidance for FY26 at INR19-21k/t c) sales product mix for series 200/300/400 stood at 37% / 47% / 16% d) capacity utilization at Chromeni to reach 70-75% in 2HFY26 from ~55% currently – to aid volume growth e) JSL signed an MoU with Maharashtra government to set up a 4mtpa greenfield stainless steel plant at a cost of INR400bn – expected gestation period to be ~4-5years. JSL’s Net debt stood at INR40bn as on 31st Mar’25 vs. INR51bn as on 31st Dec’24 – lower than guidance of INR55bn driven by 1) lower capex (INR45bn in FY25) than guidance of INR55bn – spill over to FY26 2) gain of INR1.52bn on divestment of JCL 3) better working capital management. Net Debt to EBITDA stood below 1x at 0.6x in 4Q compared to 0.9x in 3Q. Strong growth pipeline and increased focus on capacity expansion augurs well for the earnings trajectory. We revise our earning downward by 21% / 20%for FY26 / 27E driven by lower realisation – leading to a revised target price of INR720/sh (-22%) at 9x EV/EBITDA FY27E. Maintain BUY.
* Higher volumes partially offset by lower realisations: The company registered consolidated revenue from operations of INR102bn up 3% QoQ given higher volumes (+9% QoQ) partially offset by lower realisations (-6% QoQ). Operating EBITDA came in at INR10.6bn, down 12% QoQ given lower realisations. The Company witnessed sequential growth in sales volume to 643kt in 4QFY25 compared to 588kt in 3QFY25 given better domestic demand partially along with revival in export demand. Consequently, EBITDA/t declined by INR4k/t to ~INR16.5k/t in 4QFY25. Exports volume share remained flat QoQ at ~8% in 4QFY25. Adjusted PAT came in at ~INR6bn (-9% QoQ). Company reported an exceptional item of INR71mn during the quarter driven by loss during divestment of the balance 21.13% stake held in JCL.
* Healthy leverage ratios maintained amidst capacity expansion: JSL’s Net debt stood at INR40bn as on 31st Mar’25 vs. INR51bn as on 31st Dec’24 – lower than guidance of INR55bn driven by 1) lower capex (INR45bn in FY25) than guidance of INR55bn – spill over to FY26 2) gain of INR1.52bn on divestment of JCL 3) better working capital management. Net Debt to EBITDA stood below 1x at 0.6x in 4Q compared to 0.9x in 3Q. The company has guided to maintain its Net Debt to EBITDA ratio below 1.5x in the long run. Net debt and capex guidance for FY26 stands at INR35-38bn and INR27bn respectively.
* Capacity expansion on track; new greenfield project in Maharashtra announced: JSL recently signed a non-binding MoU with Maharashtra govt. to set up a stainless steel manufacturing facility with an investment of INR400bn. Company plans to set-up a 4mn tons greenfield facility over the next 15 years in Maharashtra. Gestation period for such a greenfield plant is usually 4-5 years – company expects similar timeline for this plant. Chromeni was started in Dec’24 – current utilization at 55-60%. Company expects this to go up to 70-75% in 2HFY26. Indonesia SMS facility as well as 1.1mn tons HRAP facility is expected to come in FY27.
Key Conference Call takeaways:
* FY26 guidance:
- Consol. EBITDA/t to be in INR19k-21k/t range.
- Volume growth to be in the range of 9-10%
- Net Debt as at end of FY26 is expected to be in the range of ~INR35-38bn.
- Capex for FY26 to be ~INR27bn (some spill over from FY25)
* Maharashtra greenfield project:
- JSL recently signed a non-binding MoU with Maharashtra govt. to set up a stainless steel manufacturing facility with an investment of INR400bn.
- Company plans to set up a 4mn tons facility over the next 15 years.
- Maharashtra remains one of the biggest customer base for the company.
- Gestation period for such a greenfield plant is usually 4-5 years
– company expects similar timeline for this plant.
* Net Debt came in at INR40bn, lower than guidance because of:
- Lower capex (INR45bn in FY25) than guidance of INR55bn
– spill over to FY26
- Gain of INR1.52bn on divestment of JCL.
- Better working capital management
– release in working capital
* Series mix for 4Q: 200/300/400 – 37%/47%/16%
* Indonesia SMS capacity to come by middle of next year. Half of investment in Indonesia JV was done in FY25; other half to be done in FY26.
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SEBI Registration Number is INM000010361
