Antique | JSPL 2QFY24 result update – 231101

Antique | JSPL 2QFY24 result update – 231101

Execution delays could subdue growth

Jindal Steel and Power’s (JSPL) 2QFY24 consolidated revenue at ~INR 122.5 bn was in line with our but 2.7% below consensus estimates, contracted 9.4% YoY and 2.7% QoQ. Standalone revenue at INR 120.8 bn fell 7.8% YoY and 1.9% QoQ with lower realizations offsetting steel sales volume. Net blended steel realization (5.2% below estimate) fell 7.8% YoY and 10.2% QoQ. Standalone EBITDA at ~INR 23.1 bn, grew 25.8% YoY but declined 12.9% QoQ. EBITDA per ton rose 25.8% YoY but fell 20.2% QoQ to INR 11,503 with sequentially higher volume and USD 70 per ton reduction in coking coal costs offset by lower realizations. Consolidated EBITDA at ~INR 22.8 bn rose 18.3% YoY but fell 13% sequentially with foreign subsidiaries cumulatively reporting an EBITDA loss of INR 310 mn for the quarter. Consolidated net debt rose 7.4% QoQ to INR 73.1 bn at the end of 2QFY24 (INR 68.1 bn at the end of 1QFY24), while net debt to EBITDA stood at 0.77x level (well below the company’s target of 1.5x). While external pellet sales from the newly commissioned 6 mtpa pellet plant at Angul (till blast furnace comes up) could aid top-line growth, steel volumes growth prospect stands affected with any capacity expansion project delays. Lower coal costs (captive coal mining commenced at Gare Palma IV/6; Utkal C to start in 3QFY24), slurry pipeline, improved product mix (5.5 mtpa hot strip mill expected to be commissioned in 3QFY24) will aid FY24 and FY25 margins. We maintain BUY, roll over our earnings estimate to FY26 and arrive at a revised TP of INR 697 (earlier INR 804) based on 6x 1HFY26 EV/EBITDA target multiple factoring in the higher capex guidance and plausible delayed execution of expansion projects.

Investment Summary

While external pellet sales from the newly commissioned 6 mtpa pellet plant at Angul (till blast furnace comes up) could aid top-line growth, steel volumes growth prospect stands affected with any capacity expansion project delays. We maintain BUY, roll over our earnings estimate to FY26 and arrive at a revised TP of INR 697 (earlier INR 804) based on 6x 1HFY26 EV/EBITDA target multiple factoring in the higher capex guidance and plausible delayed execution of expansion projects.