Motilal Oswal's research report on Jindal Steel and Power
Jindal Steel & Power’s (JSP) ongoing capacity expansion at Angul (Odisha) will boost the crude steel capacity by 65% to 15.9mtpa and finished steel capacity by 83% to 13.75mtpa. The expansion is expected to complete by Q1FY27 and position JSP as the fourth-largest steel producer in India. JSP is also undertaking cost-effective measures to expand the operating margin through: 1) the strengthening of raw material integration, 2) increase in the captive power plant share, 3) higher flat steel mix to ~55%, and 4) focus on VAP (current share ~67%). JSP has started production at the Gare Palma IV/6 coal mine (EC ~4mt; R&R ~160mt) and supplies coal to the Raigarh unit. Further, as the Utkal C, B1, and B2 come on stream, the RM integration and cost-effectiveness will increase, leading to margin accretion. The steel demand in India is expected to remain robust, driven by improvements in construction activity; a strong push on infrastructure projects; and a higher demand for automobiles, RE, and consumer goods. Given the robust demand coupled with incremental new capacities, we expect JSP to clock 9mt (+18% YoY) and 11mt (+25% YoY) volumes for FY25/26, respectively.
Outlook
The company deleveraged its B/S from the net debt of INR391b in FY19 to ~INR104b as of 1QFY25, translating into 1x the net debt/EBITDA. The company targets to maintain it below 1.5x, considering the ongoing capex. The robust steel demand and increased capacity place JSP in a strong position. At CMP, the stock trades at 6.2x EV/EBITDA and 1.8x P/B on FY26 estimate. We reiterate our BUY rating on JSP with a TP of INR1,200, based on 7x FY26E EV/EBITDA.
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