Buy Jindal Steel & Power Ltd for the Target Rs. 1,220 by JM Financial Services Ltd
JSP reported 1Q consol. EBITDA of INR30bn, above JMfe of INR24.3bn driven by outperformance in India ops. Consequently, EBITDA/t came in at INR15.0k/t – up ~INR5k/t sequentially driven by higher realisations and lower other costs. Key takeaways from the call – 1) FY26 sales volume guidance maintained at 8.5-9.0mn tons 2) company expects coking coal consumption cost to reduce by USD5/t in 1QFY26 3) company witnessed iron ore prices to be flattish in 2Q while steel prices have been down 5-7% QoQ in 2Q 4) Angul BF-2 commissioning remains on track with first hot metal expected this month; BoF -2 is also expected to be commissioned in 2QFY26 5) Longs / Flats mix for the quarter stood at 56% / 44% respectively 6) capex guidance for FY26 at ~INR75-100bn – incurred ~INR22bn in 1QFY26. JSP’s Net debt increased to INR144bn as on 30th Jun’25 vs. INR120bn as on 31st Mar’25 - led by working capital buildup. Net debt to EBITDA stood at 1.49x as on 30th Jun’25 vs 1.26x on 31st Mar’25. Company expects Net debt to EBITDA to remain below 1.5x in the long-term. 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. We roll-forward our target price to FY28 at an EV/EBITDA multiple of 7.5x. Re-iterate BUY.
FY28 at an EV/EBITDA multiple of 7.5x. Re-iterate BUY. ? Margins expand given lower costs: Consolidated gross revenue for the quarter stood at INR123bn (-7% QoQ) primarily on account of lower volumes (-11% QoQ) partially offset by higher realisations. Adjusted PAT stood at ~INR14.9bn (+68% QoQ). JSP’s Net debt increased to INR144bn as on 30th Jun’25 vs. INR120bn as on 31st Mar’25 - led by working capital buildup. Net debt to EBITDA stood at 1.49x as on 30th Jun’25 vs 1.26x on 31st Mar’25. Company expects Net debt to EBITDA to remain below 1.5x in the longterm.
* Standalone margins improve given higher realisations and lower costs: Consol. Adjusted EBITDA came in at ~INR30bn (+32% QoQ) adjusted for one-offs of INR210mn during the quarter. The company reported sales volume of 1.9mn tons in 1QFY26, down 11% QoQ. India standalone EBITDA came in at INR28.5bn implying EBITDA/t of INR15.0k/t – up INR5k/t sequentially driven by a) higher realisation given higher share of Value-added products (72% in 1Q vs 64% in 4Q) and b) lower RM costs/t driven by lower coking coal costs (down ~USD11/t) and no impact of one-off items witnessed in 4Q which led to higher RM costs
* Focus on raw material security and volume growth; FY26 guidance maintained: Angul BF2 commissioning remains on track with first hot metal expected this month. BoF -2 is also expected to be commissioned in 2QFY26. Company met 90-95% of its thermal coal requirements through captive sources – expects this to go up and additional coal to be used for power plants. FY26 sales volume guidance maintained at 8.5-9mn tons despite lower volumes in 1Q. Capex guidance for FY26 at ~INR75-100bn – incurred INR22bn in 1QFY26. Company witnessed iron ore prices to be flattish in 2Q while steel prices have been down 5-7% QoQ in 2Q. Longs / Flats mix for the quarter stood at 56% / 44% respectively.
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SEBI Registration Number is INM000010361
