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Revenue in line; lower input cost leads to beat on operational profitability

* Revenue in 3QFY24 was down 6% YoY at INR117b, in line with our estimate of INR119b. ASP for the quarter stood at 64,648/t (down 1% YoY), which was INR2,932/t higher than our estimate of INR61,716/t. JSP production for 3QFY24 stood at 1.9mt and sales stood at 1.8mt (down 6% and 5%, respectively). The figures are in line with our estimated production and sales of 1.9mt each.

* EBITDA was up 20% YoY to INR28b, which was 34% above our estimate of INR21b. The beat was driven by better-than-estimated NSR and lower input cost as the benefits from captive thermal coalmine started materializing.

* EBITDA/t was up 26% YoY to INR15,705/t, which was INR4,692/t above our estimate of INR11,013/t. APAT improved 115% YoY to INR19b, against our estimate of INR9b. The beat was driven by improved operational performance, lower finance cost, higher other income, and negligible tax outgo.

* In 9MFY24, revenue stood at INR365b (-6% YoY), EBITDA stood at INR78b (Flat YoY), and APAT stood at INR50b (+64% YoY).

* Net debt in 3QFY24 increased to INR91b (from INR73b in 2QFY24) and the net debt-to-EBITDA ratio stood at 0.92x (upper threshold limit of 1.5x).

Commissioning of HSM and captive thermal coal mines to drive performance

* JSP commissioned the 6mt HSM at Angul, which has paved the way for JSP to increase its finished steel capacity to 13.75mt by FY26E.

* JSP also commissioned the Gare Palma IV/6 coal mine and achieved a production of ~1mt during the quarter.

* JSP commenced production from Utkal C coal block and is gradually ramping up the production to full capacity. The entire incremental benefits from this mine is expected to accrue in FY25E and beyond.

* The mine and capacity expansions is expected to improve the integration and will make JSP one of the lowest-cost steel producers, and thereby, support margins.

Highlights from the management commentary

* Coal cost has increased ~USD32/t in 3QFY24 and is expected to further increase by USD10-12/t in 4QFY24.

* JSP has already started coal excavation at Gare Palma IV/6 and is expected to reach a run rate of over 3.5mt by Mar’24.

* The 1050mw ACPP-II (Monnet power plant) is expected to start operations by 2QFY25.

* The increase in net debt in 3QFY24 was partially due to increase in working capital requirement, due to higher receivables and increase in coking cost.

* Capex for the next three years is expected to be in the range of INR75-100b every year (INR60b spent till Dec’23).

* Iron ore requirement is expected to be 1.6x the company’s steel production.

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