Buy Jindal Steel and Power; target of Rs 751: Prabhudas Lilladher

Prabhudas Lilladher's research report on Jindal Steel and Power

We cut FY24/25E EBITDA estimates by 9%/7% on higher coking coal price assumption and delays in capacity addition respectively. Jindal steel & Power (JSP) reported strong operating performance in 2Q, driven by 9% QoQ volume growth in standalone business. EBITDA was in line with our estimates as lower than expected realization was compensated by better volumes. Average coking coal cost for 2Q was lower by ~USD70/t QoQ which is expected to increase by ~USD55/t in 3Q. JSP is well poised to take dual benefit of volume growth and improvement in product mix over FY23-26E post commissioning of HSM; however, there has been delays of few quarters in blast furnace commissioning which would impact FY25 volumes. We have cut our FY25 volume assumption accordingly and introduce FY26 estimates. Incremental volumes from pellet plant and cost savings from captive coal mines would contribute to FY25 EBITDA margins.

Outlook

We expect Revenue/EBITDA/PAT CAGR of 7%/13%/23% over FY23- 26E. At CMP, stock is trading at 6x/5x EV of FY25E/FY26E EBITDA. Retain ‘BUY’ rating with revised TP of Rs751 (earlier Rs812) valuing at 6x EV of Sept 2025E EBITDA, as we roll forward.