Motilal Oswal's research report on Jindal Steel and Power
Jindal Steel & Power (JSP) reported revenue of INR125b, down 1% YoY/8% QoQ and 11% lower than our estimate of INR139b. EBITDA at INR24b (down YoY by 28%/up 56% QoQ) was in line with our estimate of INR24b. APAT stood at INR9b (down 49% YoY/up 31% QoQ) v/s our estimate of INR12b. The company maintained its net debt at INR71b (lowest among the top four listed steel companies in India). Sales volumes stood at 1.9mt, up 4% YoY but down 6% QoQ. Exports (5% of total volumes) were affected by the imposition of export duty. Consolidated ASP stood at INR65,539/t, down 5% YoY and 3% QoQ. During the quarter, JSP was declared the successful bidder for Monnet Power Plant assets (2*525 MW) under the IBC liquidation process. JSP paid a consideration of INR4.1b; the execution of the agreement is under process. Consolidated EBITDA declined 28% YoY but rose 56% QoQ to INR24b, in line with our estimate. Consolidated EBITDA/t stood at INR12,513/t. EBITDA was supported by the reduction in input costs, especially coking coal and thermal coal costs. APAT decreased 45% YoY and increased 31% QoQ to INR9b, lower than our estimate of INR12b due to higher-than-expected depreciation, interest and tax outgo.
We maintain JSP as our top pick in the steel sector with a TP of INR700, based on 5.5x FY24E EV/EBITDA. We believe JSP’s focused approach on leverage, along with capacity expansion, should augur well.
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