Buy Jindal Steel & Power Ltd For Target Rs.1,128 By JM Financial Services
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JSP reported 1Q consol. EBITDA of INR28bn, significantly higher than JMfe of INR25bn driven by strong volume delivery ~2mn ton + and higher captive thermal coal integration during the quarter. Key takeaways from the call – a) NSR drop of 1% witnessed going into 2QFY25 2) Iron ore price drop of INR500- INR1,000/t observed in recent auctions 3) Coking coal cost drop of USD30-35/t likely in 2Q 4) Utkal B1 to commence operations soon, while Utkal C expansion to be completed shortly. 5) The company intends to abide by 1.5x net debt/ EBITDA overall. JSP’s Net debt stood at INR105bn as on 30th Jun’24 vs. INR112bn as on 31st Mar’24. Net debt to EBITDA stood at 1.0x as on 30th Jun’24 vs 1.10x on 31st Mar’24. Balance sheet continues to strengthen while supporting the on-going capex. The total capex for the quarter was INR28bn largely driven by the expansion projects in India – time over run observed in certain modules of the 6mtpa expansion. With a strong balance sheet to support growth capex, increasing raw material security and strong volume growth pipeline, JSP remains well positioned to withstand cyclical challenges – subject to execution risk. Re-iterate BUY.
* Consolidated performance up sequentially - Consolidated gross revenues for the quarter stood at INR158bn (+9% YoY). Share of exports at 7% in Q1FY25. Adjusted EBITDA stood at INR28.3bn (+5% YoY) adjusted for one-off FX gains of INR90mn during the quarter. Performance was driven by higher sales volume and reduction in costs. Reported PAT stood at ~INR14bn (-21% YoY). JSP’s Net debt stood at INR105bn as on 30th Jun’24 vs. INR112bn as on 31st Mar’24. Net debt to EBITDA stood at 1.0x as on 30th Jun’24 vs 1.10x on 31st Mar’24. Balance sheet continues to strengthen while supporting the ongoing capex. The total capex for the quarter stood at INR28bn largely driven by the expansion projects in India.
* EBITDA per ton witnesses sequential improvement – The company reported a sales volume of ~2mn tons + for the first time driven by ~450ktpa contribution from the newly commissioned HSM. EBITDA per ton increased to INR12.9k, up INR0.4k/t driven by a drop of USD23/t in coking coal costs and other expenditure. The company witnessed a delay in 6mn ton expansion in in certain modules such as BOF 1 etc. The company has already incurred a capex of INR175bn so far towards the expansion. The company expects Utkal B1 to start shortly while the capacity of Utkal C is to be expanded shortly too.
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SEBI Registration Number is INM000010361
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