IGI Logo

JSP reported adjusted EBITDA of Rs29.8bn (+14.0% vs Emkay estimate; +15.6% vs consensus; +20.3% QoQ). The sequential improvement was mainly led by a reduction in coking coal cost by USD11/t and QoQ better realization, which was partially offset by a 10.8% sequential decline in sales volume (owing to early onset of monsoons and intentional rebuilding of inventories). JSP is set to commission its new BF/BOF in Q2FY26. The management maintained its guidance; it expects Q2 inventory liquidation to boost cash flow, lower debt, and improve leverage, aided by a USD5/t drop in coking coal cost. We retain REDUCE, while increasing our TP by ~6% to Rs900 (Rs850 earlier).

Coking coal cost benefit and a one-off cost effect drove EBITDA beat

JSP reported adjusted EBITDA of Rs29.8bn (+14.0% vs Emkay; +15.6% vs consensus; +20.3% QoQ). The QoQ improvement was mainly led by a reduction in coking coal cost by USD11/t, along with a one-off effect on cost and a sequentially better realization, which was partially offset by a 10.8% sequential decline in the sales volume due to early onset of monsoons and intentional rebuilding of inventories after a strong Q4FY25. This lifted margins to Rs15,709/t in Q1 vs Rs11,651/t in Q4. Net debt increased to Rs144.0bn vs Rs119.6bn in FY25. Net debt-to-EBITDA rose to 1.5x in 1QFY26, from 1.3x in FY25, in line with the company’s guidance cap of 1.5x, driven by inventory build-up. Capex in Q1 was Rs22.3bn, taking the cumulative spend to Rs282bn of the planned Rs470bn.

Key takeaways from the earnings call

Projects: The company is set to commission key projects in FY26, including BF2 and BOF-2 in Q2, a color-coating line in Q3, and additional galvanizing lines in Q4, following the recent start of a 0.2mtpa galvanizing line at Angul. The slurry pipeline will also go live this year, boosting efficiency. Mining: JSP secured an iron ore and manganese block in Odisha, with estimated reserves of 126mt and plans to extract 1.6mt of iron ore in FY26. Thermal coal self-sufficiency remains high, with 90-95% of the requirement met from captive mines. Outlook: The management reiterated its full-year production and sales guidance despite the Q1 volume decline. Inventory accumulated in Q1 is expected to be liquidated in Q2, supporting cash flow improvement and net debt reduction. Signs of demand revival emerged in August post-monsoon, driven by strong momentum in construction and allied sectors. Q2 guidance: The management expects coking coal costs to decline by a further USD5/t, while iron ore costs are likely to remain stable. It also reaffirmed that net debt/EBITDA cap of 1.5x will be maintained.

Maintain REDUCE and raise our TP to Rs900

We raise our EBITDA estimates for FY26-28 by 2-3%, driven by anticipated cost/t improvements from developments in captive iron ore mining and increased visibility in ongoing project execution. We reiterate REDUCE and increase our TP to Rs900 (Rs850 earlier).

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354