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Operating performance marginally better than estimates; outlook remains strong

* Jindal Steel’s (JINDALST) revenue stood at INR167b (+43% YoY and +8% QoQ; vs our est. of INR156b), driven by higher volume and NSR during 2QFY27.

* Adj. EBITDA stood at INR25.7b (+38% YoY and -3% QoQ) against our est. of INR22.9b during the quarter. This translates to EBITDA/t of INR10,800 vs our estimate of INR9,800/t in 2QFY27.

* The sequential decline in EBITDA was led by cost escalation due to a surge in coking coal costs by ~USD12-14/t QoQ in 2QFY27, which was broadly in line with earlier management guidance.

* APAT for the quarter stood at INR7.7b (+79% YoY and -8% QoQ), against our estimate of INR8.5b in 2QFY27 on account of higher tax outgo.

* Production for 2QFY27 stood at 2.4mt (+20% YoY; flat QoQ) despite seasonally weak quarter. Sales volume stood at 2.38MT (+27% YoY and +7% QoQ), supported by inventory liquidation. The share of exports stood at 8% in 2QFY27, compared to 9% in 1QFY27.

* NSR rose 12% YoY and 1% QoQ to INR70,000/t on account of a higher share of flats in the overall sales mix and lower TMT sales within longs.

* The consolidated net debt stood at INR148b as of Sep’26, compared to INR159b in Jun’26. Net Debt/EBITDA improved to 1.51x in 2QFY27 against 1.71x in 1QFY27.

Key highlights from the management commentary

* Management reiterated its FY27 production volume target of ~11mt, with ~6mt target in 2H at run rate of ~0.96mt per month. The product mix target stands at 65% flats and 35% long products, while the current mix stands at ~60:40.

* VAP mix stood at 57% during 2QFY27. Management indicated that the mix exceeds 65%, with the shift from lower-priced TMT toward higher-priced flat products and other realizations-enhancing categories.

* Exports are currently running at ~100kt per month, primarily comprising HRC and plates, alongside some rails and structural steel. Management expects further export opportunities from improved access to European markets, although EU quota restrictions and CBAM remain key considerations.

* HRC and TMT spot prices have reached ~INR60,000/t, compared with lower levels during the earlier part of 2QFY27. HRC prices strengthened toward Aug-Sept, while TMT prices recovered from monsoon-related weakness. The company expects realizations to improve further in 3QFY27 and 4QFY27, supported by seasonal demand recovery and stronger steel prices.

* Management expects coal price to increase ~USD20-25/t in 3QFY27, although prices have recently stabilized. The potential resumption of Russian coal supplies through the Black Sea could ease global coking coal prices in Dec’26-Jan’27, subject to geopolitical developments.

Valuation and view – reiterate BUY

* JINDALST reported healthy earnings in 2QFY27 on account of higher volumes and NSR despite the seasonally weak quarter. Costs escalated during the quarter, mainly over higher raw material, power & fuel, and freight costs. Management expects further cost inflation in the coming quarters, which could largely offset the benefits of elevated steel price and superior VAP share.

* We remain positive on JINDALST’s long-term outlook, where the recent increase in its crude steel capacity to 15.6mtpa provides significant headroom for earnings growth. Further, the prevailing safeguard duty is expected to keep domestic steel prices steady, supporting margins against input cost volatility.

* A large proportion of capex has already been incurred, and the rest would be funded through internal accruals, keeping net debt/EBITDA below the threshold level of 1.5x. Net debt stood at INR147b in 2QFY27, translating into a net debt/EBITDA of 1.5x.

* At CMP, the stock trades at 6.7x EV/EBITDA on FY28E. We largely maintain our estimates for FY28 and reiterate our BUY rating with a TP of INR1,270, based on 8x EV/EBITDA on the FY28E.

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