Buy Jindal Stainless Ltd For Target Rs. 850 By JM Financial Services
JSL reported 1Q consol. EBITDA of INR13bn, above JMfe of 11bn. EBITDA came higher by 24% driven by better CR to HR ratio in the quarter post ramp-up of Chromeni. Consequently, EBITDA/t improved by INR4.4k/t to ~INR20.9k/t in 1QFY26. Company witnessed sequential decline in sales volume to 626kt in 1QFY26 compared to 642kt in 4QFY25 given lower scale of ops. Key takeaways from the call – a) volume growth guidance for FY26 maintained at of 9-10% b) consol. EBITDA/t guidance for FY26 maintained at INR19-21k/t c) sales product mix for series 200/300/400 stood at 36% / 46% / 18% d) capacity utilization at Chromeni to reach 80-85% in 2HFY26 from ~60-65% currently – to aid volume growth and margins e) Rathi Steel currently operates at 80-85% capacity utilisation producing more of wire rods (~70% of total volumes) – company plans to shift towards rebar going ahead. The 4mn tons expansion in Maharashtra remains on track – to be done in 4 phases of 1mn tons each. JSL’s Net debt stood at INR39bn as on 30th Jun’25 vs. INR40 as on 31st Mar’25. Net Debt to EBITDA stood below 1x at 0.2x in 1Q compared to 0.6x in 4Q. Strong growth pipeline and increased focus on capacity expansion augurs well for the earnings trajectory. We roll-forward our target price to FY28 at a target multiple of 9x EV/EBITDA. Maintain BUY.
* Margins expand given lower RM costs / better downstream mix: The company registered consolidated revenue from operations of INR102bn, flat QoQ given higher realisation (+3% QoQ) offset by lower volumes (-3% QoQ). Operating EBITDA came in at INR13bn, up 24% QoQ given higher realisation and lower RM costs. The Company witnessed sequential decline in sales volume to 626kt in 1QFY26 compared to 642kt in 4QFY25 given lower scale of ops. EBITDA/t increased significantly in 1QFY26 (up ~INR4.4k/t to INR20.9k/t) due to higher CR to HR ratio in the quarter post ramp-up of Chromeni (current utilisation at 60-65%). Cold-rolled volumes increased by ~12% in 1Q compared to 4Q. Exports volume share came in at 9% in 1Q compared to 8% in 4Q. Adjusted PAT came in at ~INR7bn (+20% QoQ).
* Healthy leverage ratios maintained amidst capacity expansion: JSL’s Net debt stood at INR39bn as on 30th Jun’25 vs. INR40 as on 31st Mar’25. Net Debt to EBITDA stood below 1x at 0.2x in 1Q compared to 0.6x in 4Q. The company has guided to maintain its Net Debt to EBITDA ratio below 1.5x in the long run. Capex guidance for FY26 maintained at INR27bnincluding INR17bn for growth capex, INR5bn for maintenance capex and INR5bn for spillover from FY25. Total capex in 1QFY26 stood at ~INR6.6bn.
* Capacity expansion on track; FY26 guidance maintained: JSL recently signed a nonbinding 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 in 4 phases of 1mn tons each 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. The land acquisition for this expansion is on track. Rathi steel is currently operating at 80-85% utilization levels with ~70% production being wire rods – company plans to focus more on rebars going forward. Indonesia SMS facility as well as 1.1mn tons HRAP facility is expected to come in FY27. FY26 guidance for consol EBITDA/t maintained at INR19-21k/t range.
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SEBI Registration Number is INM000010361
