Buy Jindal Stainless Ltd For Target Rs. 860 By JM Financial Services
Better downstream mix to drive growth; guidance intact
JSL reported 2Q consol. EBITDA of INR13.9bn, in-line with JMFe. EBITDA was up 6% QoQ driven by higher realizations (up ~3% QoQ) and higher scale of ops. Sales volume for the quarter stood at 648kt compared to 626kt in 1Q. Consequently, EBITDA/t came in at INR21.4k/t, up INR500/t QoQ. 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 34% / 49% / 17% d) company expects Chromeni to ramp-up to ~80% utilisation level in 2HFY26 with current utilization at ~70% - to aid to margins with a higher CR to HR ratio e) Rathi turned EBITDA positive with current utilisation at 70-75% – share of rebar to go up going ahead f) Indonesia SMS capacity remains on track – expected to be commissioned in FY27. With ~12% YoY volume growth achieved in 1HFY26, company maintained its guidance at 9-10 % growth for FY26 given uncertainties related to CBAM and QCO which might impact volumes in 2HFY26 – more clarity on CBAM expected by mid-Dec’25. JSL’s Net debt stood at INR36bn as on 30th Sep’25 vs. INR39bn as on 30th Jun’25. Net Debt to EBITDA stood below 1x at 0.7x in 2Q, down from 0.9x in 1Q. Capex guidance for FY26 maintained at INR27bn including INR17bn for growth capex, INR5bn for maintenance capex and INR5bn for spillover from FY25. Strong growth pipeline and increased focus on capacity expansion augurs well for the earnings trajectory. Maintain BUY.
* Margins expand given higher realization / lower RM costs: The company registered consolidated revenue from operations of INR109bn, up ~7% QoQ driven by higher realizations and higher scale of ops. Operating EBITDA came in at INR13.9bn, up 6% QoQ given higher realisation partially offset by higher RM costs. The company witnessed sequential increase in sales volume to 648kt in 2QFY26 compared to 626kt in 1QFY26 given higher scale of ops. Consequently, EBITDA/t increased in 2QFY26 (up ~INR501/t to INR21.4k/t) – also aided by due to higher CR to HR ratio in the quarter post ramp-up of Chromeni (current utilisation at ~70%). Exports volume share came in flat QoQ at 9% in 2Q. Adjusted PAT stood at ~INR7.9bn (+11% QoQ) driven by lower interest costs and marginally lower eff. tax rate. In 2QFY26, series mix for 200/300/400 stood at 34%/49%/17%.
* Healthy leverage ratios maintained amidst capacity expansion: JSL’s Net debt stood at INR36bn as on 30th Sep’25 vs. INR39bn as on 30th Jun’25. Net Debt to EBITDA stood below 1x at 0.7x in 2Q, down from 0.9x in 1Q. 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 INR27bn including INR17bn for growth capex, INR5bn for maintenance capex and INR5bn for spillover from FY25. Total capex in 1HFY26 stood at ~INR12.61bn.
* Capacity expansion on track; FY26 guidance maintained: With ~12% YoY volume growth achieved in 1HFY26, company maintained its growth guidance at 9-10 % for FY26 given uncertainties related to CBAM and QCO which might impact volumes in 2HFY26. Rathi steel is currently operating at 70-75% utilization levels with major production of wire rods – company plans to focus more on rebar’s going forward, it plans to produce 6-7k tonnes of rebar and 3-4k tonnes of wire rods. In 2HFY26, Chromeni utilisation levels are expected to be ~80-85%. Indonesia SMS facility is expected to be commissioned in FY27, whereas cold-rolling and HRAP facilities to be commissioned in 2HFY27. FY26 guidance for consol EBITDA/t maintained at INR19-21k/t range.
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SEBI Registration Number is INM000010361
