JSPL’s capacity expansions set to fuel growth
₹996.65 apiece on Wednesday. Earlier this week, the company reported a 14% quarter-on-quarter drop in its consolidated Ebitda (earnings before interest, tax, depreciation, and amortization) to ₹2,444 crore during the three months ended March (Q4FY24). A decline in steel prices and an increase in some cost items weighed on profitability despite higher volumes.
Investors seem more excited about the substantial gains expected from JSPL’s ongoing capacity expansion. Analysts project sharp growth in the company’s volumes and Ebitda over FY24-FY26. However, the risk emanates from a slowdown in China—the biggest market for metals—leading to a fall in steel prices and higher imports into India, which could hurt JSPL’s demand prospects.
JSPL has undertaken nearly a dozen projects to be completed by the third quarter of FY26. These projects mainly aim to meet three objectives. First, to increase volumes and achieve economies of scale.
Second, to increase the share of value-added grades. Third, to implement backward integration, resulting in lower production costs. The expansion would increase its finished steel capacity from 7.2 million tonnes per annum to 13.7 million tonnes.
“The 19% steel volume CAGR, improvement in product mix with commissioning of HSM (hot strip mill), and benefits of captive coal and pellets along with a slurry pipeline/conveyor belt would drive an Ebitda CAGR of 34% over FY24–26E to ₹18,200 crore and Ebitda per tonne of ₹16,700 in FY26E," said analysts from Nuvama Institutional Equities. For perspective, in FY24, JSPL’s Ebitda and Ebitda per tonne stood at ₹10,200 crore and ₹13,300, respectively. In line with its objective to increase value-added grades, the company is undertaking a project to convert
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