Jindal Steel & Power's steel EBITDA/ton increased 10% qoq in 1QFY22 on higher prices.
Chirag Batavia • 6 September 2021
CLOSED
Jindal Steel & Power Ltd (JSPL)
- JSP’s brownfield, low capital intensity expansion provides strong growth visibility.
- JSP's steel EBITDA/ton increased 10% qoq in 1QFY22 on higher prices.
- Management expects net sales realisation (NSR) to increase by Rs2,000-3,000/ton from average prices of 1QFY22.
- We estimate deleveraging to continue despite growth capex. (pg1, para1, 4th line) JSP's net debt/EBITDA is likely to decline to 0.9X in FY23.
- JPL’s divestment as a step in the right direction as it (1) significantly reduces leverage – net debt/EBITDA to reduce below 1X in FY2022 versus 1.5X earlier, (2) allows JSP to invest in high IRR growth projects, (3) increases return ratios as JPL has low single-digit RoCEs and (4) reduces JSP’s carbon footprint by ~50%.
- Divestment of non-core power business, improvement in balance sheet and attractive growth plans makes a strong re-rating case.
Note: The above is a brief note on the company, based on the inputs of KIE research report dated 11 th August 2021, which is available on their website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental .
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