JSPL up 6%; Edelweiss upgrades on Angul ramp-up, likely debt cut

Moneycontrol BureauJindal Steel & Power (JSPL) shares rallied 6 percent to close at Rs 125.50 on Friday after Edelweiss upgraded the stock to buy from hold on ramp-up in Angul capacity and likely debt reduction."We upgrade Jindal Steel & Power to buy from hold as Angul capacity ramp-up will propel sales volume by around 30 percent CAGR to 6.8 million tonne amidst relatively benign steel environment owing to capacity closures in China; and high probability of net debt plummeting around 25 percent to Rs 33,500 crore through to FY19 post Rs 4,000 crore consideration from sale of 1,000MW power plant," the brokerage house said in its note.Edelweiss revised upward FY18 and FY19 volumes estimates by 5 percent and 12 percent, respectively. It also raised target price of the stock to Rs 160 from Rs 97 earlier as it is trading at a sharp discount to 15 years' trading average.The brokerage house expects consolidated EBITDA to jump 32 percent YoY to Rs 8,200 crore by FY19 and standalone EBITDA to clock 40 percent CAGR to Rs 6,300 crore over FY16-19 led by ramp up of the 3.2 million tonne per annum (MTPA) blast furnace at Angul in 10-12 months.Moreover, steel EBITDA per tonne is estimated at Rs 7,800 on an average for the forecast period due to benefits of operating leverage. Additionally, capacity ramp up at 1.4mtpa rebar mill in Oman operations and sustained positive EBITDA from international mining operations are likely to boost earnings further, Edelweiss says.