Neutral Jindal Stainless Ltd for the Target Rs 910 by Motilal Oswal Financial Services Ltd
Strong performance driven by SS price recovery
* Jindal Stainless’ (JDSL) reported revenue stood at INR113b (+11% YoY and flat QoQ), above our estimate of INR103b during 1QFY27. The growth was attributed to strong ASP recovery, which offset muted volume.
* EBITDA stood at INR13.3b (vs. est. of INR12.3b), flat YoY but down 9% QoQ on account of muted volume and cost escalation, which were partially offset by strong NSR.
* APAT stood at INR7.7b (vs. est. of INR6.7b), up 8% YoY but down 14% QoQ.
* Sales volume came in at 581kt (in line with our est.), down 7% YoY and 10% QoQ mainly on account of the limited availability of propane and LPG amid the Middle East crisis. 1Q ASP stood at INR194,188/t, up 19% YoY and 10% QoQ, led by SS price recovery.
* Export share increased to 11% during the quarter from 7% in 4QFY26 and 9% in 1QFY26. This was supported by expanding opportunities in South Korea, Japan and Brazil and strengthening presence in Europe and the US.
* EBITDA/t stood at INR22,884 (vs. our estimate of INR21,326/t), up 9% YoY and 1% QoQ, supported by better NSR offsetting the input cost escalation during the quarter.
* Consolidated net debt remained steady at ~INR30b, translating into a net debt-to-equity ratio of 0.14x as of 1QFY27.
Highlights from the management commentary
* Management retained its FY27 guidance and was confident of achieving 8- 10% volume growth and EBITDA/t of INR18,000-20,000 in 1HFY27.
* The volume decline in 1Q was primarily due to industrial gas shortages and logistics disruptions linked to the Middle East conflict. Management indicated that production has now returned to pre-crisis levels and expects a gradual recovery in volumes over the coming quarters.
* Management highlighted that gas prices have moderated from the peak levels and the company has reduced its dependence on imported LPG and propane by commissioning piped natural gas (PNG) at the Jajpur plant, with similar projects underway at Hisar.
* Product mix: 200 series at 35%, 300 series at 47%, and 400 series at 18%. Management highlighted that the company selectively prioritized highervalue product segments during the quarter to protect profitability amid production constraints.
* Rathi Steel's operations recovered after temporary fuel-related disruptions, with capacity utilization improving back to ~70%, while Chromeni continued to perform strongly at ~80-85% utilization and was a key contributor during the gas disruption due to uninterrupted PNG availability.
Valuation and view
* JDSL reported a strong operating performance in 1QFY27, supported by improved NSR, which largely offset the muted volume and cost escalation impact during the quarter. Going forward, we expect earnings to remain strong in FY27/28, mainly on account of incremental volumes from newly added capacity and healthy SS prices offsetting high nickel prices. While there would be near-term challenges related to cost inflation, the medium- to long-term outlook remains robust.
* At the industry level, SS demand is set for strong growth and is projected to reach +7mt by FY31, driven by domestic SS consumption. As the dominant player in SS space, we believe JDSL is well-placed to capitalize on this robust demand outlook, with higher VAP supporting margins.
* We largely retain our estimates for FY27/FY28. We project a revenue CAGR of ~15% and steady EBITDA/t of INR21,000-22,000, leading to a 12% EBITDA CAGR over FY26-28E. Moreover, healthy CFO and steady capex will ensure a resilient balance sheet (consol. net debt-to-equity of 0.14x in 1QFY27) to fund the next leg of expansion.
* At CMP, the stock trades at 8.9x FY28E EV/EBITDA. We reiterate our BUY rating with a TP of INR910 (premised on 11x FY28E EV/EBITDA).
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