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Operationally in-line performance; capex timeline extended with higher outlay

* Revenue was down 9% YoY at INR123b, in line with our estimate of INR122b. ASP was down INR582/t to INR60,946/t as against our estimate of INR61,528/t. Sales volumes were flat YoY to 2.01mt (in line with our estimate of 1.98mt) and exports stood at 13% of total sales.

* EBITDA grew 18% YoY to INR23b (in line with our estimate). The increase was led by lower input costs, partially offset by lower ASP. EBITDA/t stood at INR11,372/t vs. estimate of INR11,496/t.

* APAT more than doubled YoY to INR14b (our estimate INR9b), aided by lower finance costs and depreciation and negligible tax outgo.

* Net debt stood at INR73b (up ~INR5b QoQ) and the net debt-to-EBITDA ratio stood at 0.77x.

Capex timeline extended; outgo now pegged at INR310b

* JSP’s ongoing capex at Angul has been delayed by a few quarters and a majority of the capex is now expected to be completed by the end of FY25.

* The capex outlay has also been increased by INR70b to INR310b. This increase is attributed to scope changes and configuration adjustments.

* Major capex schedules for BOF-II, BF-II, ACPP-II, etc., has been extended by two quarters to 4QFY25.

* Capex for FY24E is expected to be in the range of INR75-100b

Highlights from the management commentary

* Coal cost is expected to increase by USD50-60/t in 3QFY24. It is expected to be partially offset by a 2-3% increase in ASP.

* The 5.5mt HSM is expected to come on stream in 3QFY24.

* 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 (PRC 4mt). Utkal C is expected to commence coal excavation by Nov-Dec’23.

* Once the slurry pipeline is fully operational, it would save ~INR700/t in iron ore cost.

Valuation and view

* Though ongoing capex is going to shift JSP’s product portfolio to higher VAP, extension in capex timeline along with an increase in cash outflow will continue to put pressure on the cash flow. The timely completion of capex is crucial for volume growth ahead.

* Considering the substantial increase in coal cost in the last few months and delayed capex, we have revised our FY24E and FY25E EBITDA estimates down by 13%/6%. We reiterate our BUY rating on JSP with a revised TP of INR730, based on 5.5x FY25E EV/EBITDA. We believe JSP’s focused approach on deleveraging, presence across VAP, and robust domestic demand augur well for the company. The stock is currently trading at 4.8x FY25E EV/EBTIDA and 1.3x FY25E P/B

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