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Strong domestic; improving export market outlook

Quick Pointers:

* Mgmt. guided for cons FY26 EBITDA/t range of Rs19k-21k with 9-10% YoY volume growth as traction is improving in key export markets like US & EU.

* Chromeni plant is operating at 55% utilization in Apr’25 and expected to ramp up to ~75% by end FY26E.

Jindal Stainless (JDSL) reported largely in-line standalone operating performance in Q4FY25 led by strong volume growth. Volumes grew 13% YoY to 643kt led by strong 17% YoY domestic volume growth led by infra, metro and railways sector. Exports volume continued to remain weak and contributed ~8% to total volumes however mgmt. is seeing good traction in key quality conscious markets of EU and US in near to medium term. Average realization declined 2% QoQ as domestic pricing came under pressure post US tariff talks amid continued cheap imports from Vietnam & China. Mgmt. indicated SS industry body would file anti-dumping petition in few weeks as imports from Vietnam have shot up significantly in FY25. EBITDA/t was tad better than PLe at Rs13,857 despite series 400 contribution (having least nickel content) coming off in recent quarters. We believe JDSL can grow much faster than guided 9-10% volume growth as mgmt. is seeing traction in exports and domestic demand remains strong. GoI's efforts to promote SS usage along India's large coastline has enhanced market awareness and encouraged material substitution. We expect domestic SS volume growth to remain strong over next few years led by automotive, railway coachs, metro, white goods, and pipes & tubes sectors. Critical sectors, such as process, hydrogen, and nuclear industries hold significant growth potential for the next many years.

We expect JDSL to deliver double digit volume CAGR over FY25-27E led by ramp up of Chromeni and upcoming 1.2mtpa SSMS in Indonesia (which would increase its capacity to 4.2mtpa by FY27). Things to watch out for: a) uptick in key export markets, b) expansion progress, and c) SS and nickel pricing spreads. We expect JDSL to deliver a strong 15%+ CAGR over FY25-27E as it has adequate capacities. We tweak our FY26/27E EBITDA estimates by - 2%/+3% incorporating weak SS pricing. We expect revenue/EBITDA/PAT CAGR of 15%/16%/27% over FY25-27E. At CMP, the stock is trading at 9.5x/7.7x EV of FY26E/FY27E EBITDA. Maintain ‘Buy’ rating with revised TP of Rs678 (earlier Rs655) valuing at 9x EV of Mar’27E EBITDA.

Strong domestic volume led growth: JDSL’s merged standalone revenue grew 13% YoY to Rs107.8bn (+7% QoQ; PLe Rs104.64bn) on strong volume growth. Average realization declined 2% QoQ to Rs168k/t (+0.5% YoY; PLe Rs165k/t) as imports from Vietnam and China continued to impact domestic pricing. Stainless steel (SS) volumes grew 12.7% YoY to 643kt (up 9.4% QoQ; PLe 633kt) on strong domestic volumes. Domestic volumes grew ~17% YoY to 591kt while export volumes declined ~18% YoY to 51kt forming ~8% of total JDSL’s volumes (up 3% QoQ). In Q4FY25, export demand began to rise, and it is projected to improve in the short and medium term, especially in the quality-conscious markets like the US and EU, as per Mgmt.

EBITDA was impacted by low NSR: Std. EBITDA grew 7.6% YoY to Rs 8.9bn (PLe Rs8.3bn; -11% QoQ). EBITDA/t declined 4.5% YoY to Rs13,857 (-19% QoQ; PLe Rs13,127/t) which was affected due to weak SS pricing in domestic markets as exports were weak and domestic pricing witnessed pressure post US tariff announcements amid higher imports. RM cost/t increased 2.5% YoY to Rs118k, employee cost grew 9% YoY to Rs3,024/t, Stores declined 17% YoY at Rs6,902/t, P&F declined 4.6% YoY to Rs9,623/t while other expenses grew ~2% YoY to Rs16,579/t which were tad higher despite higher volumes. Cons. EBITDA increased 2.5% YoY to Rs10.6bn better than PLe of Rs 10.2bn. JUSL EBITDA declined 2.8% YoY to Rs1.73bn. Cons. reported PAT increased 18% YoY to Rs5.91bn (PLe Rs4.9bn). Std PAT of Rs9.25bn includes an interim dividend of Rs2.45bn from JUSL classified under other income.

Q4FY25 Conference Call Highlights:

* Consolidated EBITDA/t is expected to be in the range of Rs19,000-21,000 for FY26 as there is visible improvement in exports and a ~20-30% growth in export volumes is expected in FY26.

* JDSL’s std. net debt stands at Rs40.5bn. Consolidated debt for end FY26 guided at Rs35bn-Rs37bn. JDSL’s net debt to EBITDA stood at 0.86.

* The acquisition of stake in M1 Exchange enables the extension of credit to large OEMs, easing the working capital burden.

* Share of RE power stood at 11%; it is expected to increase to 32-35% on full commissioning of planned capacities. The company recently commissioned the largest solar CPP in Odisha with a capacity of 30MW.

* Jajpur plant is being operated at full utilization and the downstream expansion is undergoing as planned to be commissioned in FY27 due to delays.

* Chromeni plant is currently running at 55-60% CU and is being ramped up to reach 70-75% by Q4FY26.

* Volume mix for 4QFY25 was 37%/47%/16% for Series 200/300/400 respectively.

* The company is focusing on enhancing production of value-add products from the Rabirun unit.

* Rathi unit is currently at 75% CU and the company is focusing on production of SS rebar from the unit to support demand from infra sector.

* FY26 capex is pegged at Rs27–28bn, including spillovers from FY25, as part of the broader Rs55bn capex plan. No new capex has been announced.

* JDSL is planning to develop a 4mtpa capacity at Maharashtra as the state has maximum customers, potential to grow and locational advantage for targeting exports. Although it is in a nascent stage, JDSL plans to spend over Rs400bn over next 10-15 years.

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