Buy Jindal Stainless Ltd For Target Rs. 783 By Elara Capital Ltd
Subdued exports cap volume growth
Jindal Stainless (JDSL IN) delivered a stable performance in Q3FY25, with consolidated EBITDA at ~INR 12bn, aligning with both our and Consensus estimates. Consolidated net sales increased ~9% YoY/1% QoQ to ~INR 99bn, broadly in with our/Consensus estimates of ~INR 99bn/97bn, respectively. Adjusted PAT fell ~5% YoY but rose ~7% QoQ to ~INR 6.5bn. Despite ongoing challenges from cheap imports and sluggish exports market, JDSL achieved a volume growth of ~15% YoY/4% QoQ in Q3FY25. We believe healthy domestic demand and ramp-up at Chromeni Steel will serve as key growth drivers in the near term. Also, any favorable decision on safeguard duty could support performance. Thus, we upgrade JDSL to Buy from Accumulate.
However, we cut our EBITDA estimates by ~5% for FY25E, ~9% for FY26E and ~12% for FY27E, to reflect the weakness in exports market. We roll-over to March 2027E from September 2026E and lower TP to INR 783 from INR 852.
Guidance trimmed on weak exports markets:
While strong domestic demand continued to drive JDSL’s volume, exports remained subdued, with the share of exports declining to 8% in Q3FY25 versus 12% in Q3FY24 and 10% in Q2FY25. Given persistent challenges in the exports market, the management has lowered its FY25 volume growth guidance to 9-10%, down from Q2FY25 guidance of 10-15%. Also, the management now expects FY25 standalone EBITDA/tonne to be ~INR 17,000, lower than its earlier guidance of ~INR 18,000 in Q2FY25.
First double-digit YoY volume growth in FY25:
Standalone sales volume improved ~15% YoY/4% QoQ to 587,658 tonnes, largely as estimated. Realization fell ~3% YoY/1% QoQ to INR 171,283/tonne, ~1% above our estimates. However, this benefit was offset by higher-than-expected operating cost. Operating cost was down ~2% YoY but flat QoQ at INR 154,209/tonne, ~1% above our estimates. Consequently, EBITDA/tonne declined ~14% YoY/4% QoQ to INR 17,075, mostly in line with our estimates of INR 17,150. Consolidated EBITDA/tonne (on standalone volume) was down ~16% YoY/2% QoQ at INR 20,548
Upgrade to Buy, TP pared down to INR 783:
We believe healthy domestic demand and ramp-up at Chromeni Steel will serve as key growth drivers in the near term. Also, any favorable decision on safeguard duty could further support performance. In the long term, completion of ongoing growth capex and investment in other projects should support performance. Therefore, we upgrade JDSL to Buy from Accumulate
We roll-over to March 2027E from September 2026E. Also, considering exports challenges and continued pressure from cheap imports in the domestic market, we cut our EBITDA estimates by ~5% for FY25E, ~9% for FY26E and ~12% for FY27E. Thus, our TP is pared down to INR 783 from INR 852, on 15x (unchanged) March 2027E P/E. Increased imports of low-cost material from China and other countries and demand slowdown from key end-user industries are key risks to our call.
Please refer disclaimer at Report
SEBI Registration number is INH000000933
