accumulate

Prabhudas Lilladher’s research report on Jindal Steel and Power

Jindal Steel & Power’s (JSP) consolidated operating performance in Q2FY25 was a tad better amidst weak steel prices and muted volumes. Volumes declined 8% YoY due to a tepid demand environment amidst monsoon. Average NSR declined 8% QoQ on sharp decline in long product prices. Average coking coal cost declined by ~USD35/t QoQ, which is expected to decline further by USD20-25/t in Q3FY25. Subsidiaries’ performance improved QoQ due to rampup of Angul facilities, which has aided cons EBITDA delivery. Post China stimulus announcements, long product prices in India have recovered from the lows of Sep’24. We expect domestic demand to improve in H2FY25 aided by uptick in infrastructure activities supported by GoI, which would support long product pricing. The management reiterated its commitment towards timely execution of ongoing expansion at Angul, slurry pipelines and railway logistics projects, which in addition to the opening of captive coal (Utkal B1) mines, shall reduce input costs from FY26.

Outlook

However, volume growth would depend upon timely delivery of the blast furnace, supporting the metallic requirement of HSM. We cut FY26/27E EBITDA by 3%/6% to incorporate lower steel prices and expect revenue/EBITDA/PAT CAGR of 15%/25%/25% over FY24-27E. At CMP, the stock is trading at 6.5x/4.8x EV of FY26E/FY27E EBITDA. Maintain ‘Accumulate’ with revised TP of Rs1,017 (earlier Rs1,090) valuing at 6x EV of Sep’26E EBITDA.

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