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Ramp up VASP & cost savings: Next leg of growth

Jindal Steel (JINDALST) delivered a healthy operational performance in Q1FY27, supported by strong volume growth, improved NSR and a richer product mix. Sales volumes increased 17% YoY, driven by the ramp-up of blast furnaces at at Angul, while resilient domestic demand and higher exports provided additional support. NSR improved sequentially on the back of higher flat and long steel prices, along with a higher share of value-added products (VASP), resulting in stable profitability despite elevated coking coal costs and maintenance shutdown taken during the quarter. Mgmt. reiterated that the shutdown-related production loss would be recovered over the balance of FY27, while the share of VASP is expected to increase further as downstream facilities continue to ramp up.

Mgmt. maintained its FY27 production and sales guidance, while going forward, the focus remains on improving capacity utilization at Angul, expanding the VASP portfolio and reducing costs through operating leverage, higher captive raw material integration and commissioning of the slurry pipeline. While coking coal costs are expected to increase further in Q2FY27 (~US$15/t), mgmt expects the impact to be largely offset by the absence of shutdown-related costs, logistics savings from the slurry pipeline and ongoing cost optimization initiatives, supporting broadly stable margins. It also expects long steel demand and prices to improve post the monsoon driven by a recovery in construction activity and govt. spending, while flat steel prices are likely to remain relatively stable. Overall, execution of the ramp-up, progress on cost reduction initiatives and steel spreads remain key monitorables. We have cut FY27E EBITDA estimates by -7%, assuming lower longs pricing and gradual improvement later as cost efficiency projects yield results. We expect EBITDA CAGR of over 40% over low base of FY26. At CMP, the stock is trading at 9.6x/6x EV of FY27/28E EBITDA. Maintain ‘Buy’ with revised TP of Rs1,298 (earlier INR1,295) valuing at same 7.5x EV of Mar’28E EBITDA.

Strong operational performance driven by volume ramp-up and higher NSR

Consolidated Q1FY27 operating performance led by higher volumes, higher steel pricing and better product mix. Sales volumes grew 17% YoY to 2.23mt (PLe 2.13mt) led by ramp-up of BF, BOF2 and BOF3 and resilient domestic demand. Exports contribution to the volume was 9% (0.21mt) vs 5% in Q4FY26. Average NSR grew 14% QoQ to INR 69,400 (PLe INR 64,555) led by sharp uptick of 9% and 4.6% in flats and longs steel prices respectively during the quarter and richer valueadd product mix. Cons revenue increased 26% YoY to INR 154.76bn (-3%Q QoQ; PLe Rs137.4bn). Production increased 15% YoY to 2.4mt. Share of value-added steel improved to 66% in Q1FY27 (61% in Q4FY26).

Higher input costs offset operational gains:

Consolidated adjusted EBITDA declined 11% YoY to INR26.5bn (flat QoQ; PLe INR24.6 bn), after adjusting for a one-off forex gain of INR0.06 bn. Adjusted EBITDA/t declined 24% YoY to INR 11,903 (+18% QoQ; PLe INR 11,558), primarily due to higher coking coal costs. Consequently, consolidated PAT declined 19% QoQ to INR8.44 bn, largely on account of lower other income (PLe INR9.5 bn).

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