Accumulate Jindal Steel; target of Rs 1151: Prabhudas Lilladher

Prabhudas Lilladher's research report on Jindal Steel

Jindal Steel (JINDALST) reported a weak cons operating performance in Q2FY26, impacted by weak steel prices and absence of volume growth. Volumes grew 1% YoY constrained by capacity and planned shutdowns. Average NSR fell 5% QoQ amid seasonal slowdown in construction and infraactivity which led to lower pricing. Lower coking coal (USD4/t) negated lower steel prices with EBITDA/t dipping to Rs10,027 (ex-fx gains of Rs2bn). With commissioning of 4.6mtpa BF and BOF-II, Angul is on track to ramp up volumes over the next few quarters. Mgmt. reiterated its earlier FY26 sales volume guidance of 8.5–9mt. Extended monsoon-led demand slowdown and gradual surge in imports have pressured steel prices in recent months, which would weigh on near term earnings. We expect incremental volumes from Angul to drive earnings from Q4FY26 while NSR would improve on price hikes based on uptick in domestic demand from Nov’25 and rising costs. Key things to watch out: 1) Rise in steel prices on improved infra and GST led demand in user industries, 2) addition of remaining facilities and volume ramp up from Angul, 3) falling spot spreads on stable coking coal prices. We have cut FY26/27E EBITDA estimates by 1%/4% on lower volume assumptions and expect EBITDA CAGR of 26% over FY25-28E.

Outlook

At CMP, stock is trading at 7.1x/5.7x EV of FY27/28E EBITDA. Maintain ‘Accumulate’ with revised TP of Rs1,151 (earlier Rs1,170) valuing at 7x EV of Sep’27E EBITDA.

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