Motilal Oswal's research report on Jindal Steel and Power
Jindal Steel & Power (JSP) reported yet another in-line quarter. While the topline was higher than our estimates driven by higher ASP, EBITDA was in line post-adjusting for FX gains. The company reduced its net debt to INR70b (lowest among the top four listed steel companies in India). Consolidated revenue was flattish YoY but up 4% QoQ to INR135b in 2QFY23. The 13% beat on revenue was driven by a 6% beat on ASP and a 7% beat on sales volumes. Sales volumes for the quarter stood at 2.01mt, down 6% YoY but up 16% QoQ. Exports were 11%. ASP was at INR67,271/t, up 5% YoY but down 10% QoQ due to imposition of export duty. During the quarter, JSP also recorded INR4b FX gain in foreign subsidiaries as a one-off on strengthening USD. However, adjusted for the same, the consolidated EBITDA was in line with estimate.
We maintain JSP as our top pick in the steel sector with a revised TP of INR565 based on 6x FY23E EV/EBITDA. We believe JSP’s focused approach on leverage along with capacity expansion will augur well.