PL First Cut – Jindal Steel & Power Q2FY24

PL First Cut – Jindal Steel & Power Q2FY24 – Tushar Chaudhari – Research Analyst, Prabhudas Lilladher Pvt Ltd

Jindal Steel & Power (JSP IN, CMP 634, TP 751, BUY): In line; lower coking coal cost saves the day, Capex delayed and increased by Rs7k cr

☘️ Std revenue declined 2% QoQ to Rs 120.8bn (-8% YoY, PLe Rs124.9bn) led by sharp decline in realization (-10% QoQ /-8%YoY; PLe Rs63.4k) to Rs60.1k. Sales volume grew 9% QoQ to 2.01mt (PLe 1.98mt) led by strong domestic demand.

☘️ Std EBITDA increased 26% YoY (-12% QoQ) to Rs 23.1bn (PLe 23.2bn) on account of decline in RM and other expenses. EBITDA/t stood at Rs11,632 (+27% YoY; PLe 11,838/t). Cons. EBITDA stood at Rs 22.8bn (+18% YoY/-13% QoQ; PLe 22.9bn). Cons. PAT was higher than est. as tax rate was lower due to poor performance from overseas subsidiaries.

☘️ Commissioning of 5.5mtpa Hot Strip Mill (HSM) is on track to be completed in 3QFY24 but expect delay in commissioning of 3mtpa BOF-III although mgmt is confident of achieving revised timelines of 4QFY25. Machinery ordering has started. BOF-II timeline further pushed by two quarters to 4QFY25 while mgmt expects it to commission earlier than given deadline.

☘️ Mgmt has tweaked its capex plan over last 3 months which led to capex increase by Rs7k cr to Rs31k cr, out of which Rs10.5k is spent till date. 3mtpa BOF III is planned instead of EAF earlier, while 1.2mtpa CRM and 0.5mtpa plate mill is added instead of Thin slab caster line. Capex on railways (Rs600cr) wagons and lines for material transfer is added.

☘️ Overburden removal from Utkal C coal mine started while production to start by Dec-23; although previous owner has raised fixed cost considered earlier at the time of auction; which may cause delays. Gare Palma mine production (1.5lac ton in 1st month) to witness ramp up in coming months.

☘️ We cut FY24/25E EBITDA estimates by 9%/7% on higher coking coal prices and delays in capacity addition respectively. Avg. coking coal cost for 2Q was lower by ~USD70/t QoQ but 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. Incremental volumes from pellet plant and cost savings from captive coal mines would contribute to FY25 EBITDA margins. 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.