Accumulate Jindal Steel & Power, target price Rs 987: Prabhudas Lilladher
Jindal Steel & Power Ltd. with a target price of Rs 987.0. The current market price of Jindal Steel & Power Ltd. is Rs 976.75 .
Jindal Steel & Power Ltd., incorporated in the year 1979, is a Mid Cap company (having a market cap of Rs 95816.87 Crore) operating in Metals — Ferrous sector.
Investment Rationale
Jindal Steel & Power (JSP) reported largely in-line cons. operating performance in 4Q, despite weak NSR (-5% QoQ) in standalone business which got offset by higher volumes (11% QoQ) aided by export volumes.
Average 1Q coking coal cost expected to decline by ~USD30-40/t QoQ while ramping up of pellet plant to drive margins. Although near term volume growth depends upon timely commissioning of BF-II, we expect delays of few months due to external events. RINL JV was expected to supply feedstock for HSM to improve product mix in 1H; however ongoing crisis led by worker’s strike at Gangavaram port is causing delays. JSP is well poised to take dual benefit of volume growth and improvement in product mix in the long term.
Incremental volumes from pellet plant, conversion of semis at HSM and cost savings from captive coal mines would contribute to EBITDA margins by FY26E. We increase FY25/26E EBITDA by 5%/8% respectively to incorporate rising long product prices and expect Revenue/EBITDA/PAT CAGR of 17%/30%/28% over FY24-26E. At CMP, the stock is trading at 7.7x/5.7x EV of
FY25E/FY26E EBITDA which appear full.
We downgrade the stock to ‘Accumulate’ from ‘BUY’ earlier with revised TP of Rs987 (earlier Rs980), valuing
