PL Stock Report: Jindal Stainless (JDSL IN) - Q2FY24 Result Update – Strong volume led performance - BUY

Jindal Stainless (JDSL IN) - Tushar Chaudhari - Research Analyst, Prabhudas Lilladher Pvt Ltd.

Rating: BUY | CMP: Rs469 | TP: Rs543

Q2FY24 Result Update – Strong volume led performance

Quick Pointers:

§ Volumes grew 25.5% YoY to 543.6kt as demand from domestic end user industries remained robust led by Auto and consumer facing segments.

§ Commissioning of 1.6 mtpa HSM capacity at JUSL completed at Jajpur.

Jindal Stainless (JDSL) reported robust operating performance in 2Q, driven by 26% volume growth. Revenue was 4% below our estimates led by weak realization. The company is expected to deliver 15% volume CAGR over FY23-26E led by rising stainless steel (SS) demand in India and ramping up of Jajpur facility. Next phase of expansion at Jajpur will be announced in 2HFY24, which will drive volume growth post FY26.

We believe that JDSL will be key beneficiary of rising SS demand over next few years led by govt.’s focus on infrastructure and overall stronger domestic economy. We maintain our FY25E EBITDA and cut FY24E by 5% on higher pricing pressure in the near term. We expect Revenue/EBITDA/PAT growth of 14%/25%/29% over FY23-26E. At CMP, stock is trading at 6.3x/4.9x EV of FY25E/FY26E EBITDA. Retain ‘Buy’ rating with revised TP of Rs543 (earlier Rs484) valuing at 6.5x EV of Sept 2025E EBITDA, as we roll forward.

Robust 26% volume growth led by domestic end user industries: Standalone merged revenue grew 13.6% YoY to Rs97.2bn, led by 25.5% YoY volume growth and 10% decline in realization. Average realization at Rs179k/t was affected by pricing pressure due to lower export share during 2QFY24 and continued imports in domestic markets. Demand from domestic end user industries remained robust led by auto and consumer facing segments.

54% YoY EBITDA growth & EBITDA/t of Rs19,679: Standalone EBITDA grew 54% YoY to Rs10.7bn (PLe Rs10.8bn). EBITDA/t increased 22.6% YoY to Rs19,679 which was within the company guidance range of Rs19-21k. Cons. EBITDA grew 80% YoY to Rs12.3bn, in-line with PLe of Rs12.4bn. Cons. PAT grew 115% YoY to Rs 7.6 bn (PLe Rs 7.3 bn) which included exceptional income of Rs 1 bn on account of re-measurement of its previously held 26% equity stake of JUSL.

Concall Highlights: (1) FY24E EBITDA per ton guidance maintained, as raw material led inflation was intact. (2) The product mix between series 200, 300 and 400 stood at 36%, 44% and 20% respectively for 2QFY24. (3) Capex guidance of Rs32bn for FY24, JDSL spent Rs20bn in 1H. (4) JUSL 1H EBITDA at Rs4bn; JDSL received Rs2bn dividend from JUSL (5) Debt levels are expected to be ~Rs47bn by FY24 end (6) Board approved a dividend payout of Re1 aggregating to Rs823.4mn. (7) Nickel Pig iron plant in Indonesia to commission operations by 1QFY25 and Rathi Steel is expected to commence operations from Dec’23. (8) JDSL has invested further Rs1bn in Rathi Steel to stabilize and ramp up the plant (9) Iber jindal S.L performance shall improve once Europe picks up from 4QFY24.

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