Buy Jindal Steel Ltd for the Target Rs. 1240 by Motilal Oswal Financial Services Ltd
Strong quarter despite heavy monsoon; outlook remains healthy due to volume growth
* Jindal Steel (JINDALST)’s revenue for 2QFY26 stood at INR117b (+4% YoY vs. our estimate of INR107b), declining 5% QoQ due to muted realization.
* The ASP stood at INR62,491/t (+3% YoY and -3% QoQ) vs. our estimate of INR59,508/t in 2QFY26. The rise in the export share from 7% in 1QFY26 to 10%, along with an all-time high value-added share of 73% (rise in the share of flats in the sales mix by 5%) in 2Q, resulted in better-than-expected NSR.
* Adj. EBITDA stood at INR20.8b, down by 5% YoY and 31% QoQ (against our est. of INR15.8b) over muted realization and stable cost. EBITDA/t declined to INR11,129/t (-6% YoY) in 2QFY26 from INR15,819/t in 1QFY26.
* Adj. PAT for the quarter stood at INR6.6b (-24% YoY and -56% QoQ) against our estimate of INR3.7b, led by better-than-expected operating profit.
* Production and sales stood at 2mt (+2% YoY and -4% QoQ) and 1.87mt (+1% YoY and -2% QoQ), respectively, in 2QFY26. ? In 1HFY26, the revenue and EBITDA stood at INR240b (-3% YoY) and INR51b (+1% YoY), whereas the Adj. PAT fell by 2% YoY to INR21b. Production and sales volume in 1HFY26 stood at 4.1mt (+2% YoY) and 3.7mt (-4% YoY), respectively. We expect JINDALST to see ~5mt (+30% YoY) of volume in 2HFY26, fueled by Angul’s new capacity ramp-up.
Key highlights from the management commentary
* Management expects the long steel share to rebound in 2H FY26, in line with post-monsoon recovery in construction and infrastructure demand. It expects to normalize to 55:45 (flats:longs) by year-end.
* Coking coal costs reduced by USD4/t in 2QFY26 (in line with the guidance of USD5/t) and are expected to increase by USD3-5/t in 3QFY26.
* Iron ore prices from NMDC have seen cuts recently, but OMC auction prices remain elevated.
Valuation and view – reiterate BUY
* JINDALST’s 2QFY26 performance remained strong despite heavy monsoons across India. Earnings are expected to improve in 2H, aided by volume rampup, NSR recovery, and muted costs.
* Completion of phase II of Angul expansion will increase JINDALST's crude steel capacity to 15.9mtpa and finished steel to 13.8mtpa, providing significant headroom for earnings growth.
* Net debt stood at INR142b as of Sep’25, translating to a net debt/EBITDA of 1.48x in 2QFY26 vs. 1.49x in 1QFY26. It aims to keep debt levels in check.
* We largely maintain our earnings estimates for FY26/27E. At CMP, the stock trades at 7.3x EV/EBITDA on FY27E. We reiterate our BUY rating with a TP of INR1,240, based on 7.5x EV/EBITDA on the Sep’27 estimate.
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412
