Prabhudas Lilladher is bullish on Jindal Steel and Power has recommended buy rating on the stock with a target price of Rs 360 in its research report dated January 22, 2018.
Prabhudas Lilladher's research report on Jindal Steel and Power
We organised investor visit of Jindal Steel and Power (JSP)’s Raigarh and Angul steel facilities and Tamnar IPP. The newly commissioned Basic Oxygen Furnace (BoF) at Angul reached production run‐rate of 25 heats/day (equivalent to 6250tpd) and expected to stabilise at its designed capacity of 33 heats/day by mid March‐18. Keeping pace with ramp‐up in BoF, Blast Furnace (BF) is operating at 6ktpd. Higher production in BoF and restart of Neo Electric Oxygen Furnace (NEoF) would drive the increase in BF’s production to 10ktpd by April‐18. Management guided for an output of 6mn tonnes in FY19 (equally distributed between Angul and Raigarh) and cost reduction of Rs3000/t, driven by lower variable cost and higher scale benefit. Our entire rationale of increased scale, low cost and higher PLFs in JPL remains intact and will be reflected from Q1FY19 onwards as the new capacity stabilises.Outlook
We maintain our BUY rating with revised TP of Rs360 (earlier Rs315), at EV/EBITDA of 7x FY20E.
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