Jindal Steel and Power
Estimate change
TP change
Rating change
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23 July 2020
1QFY21 Results Update | Sector: Metals
CMP: INR172
On the path to deleveraging
Strong show amid challenging times
TP: INR226 (+32%)
Buy
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E March
Sales
EBITDA
Adj. PAT
Adj. EPS (INR)
EPS Gr(%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV
EV/EBITDA (x)
Div. Yield (%)
2020
370.0
78.5
-3.7
-3.6
-210
315
-1.1
4.8
0.0
-47.7
0.5
7.1
0.0
2021E
374.4
94.2
7.9
7.7
-315
324
2.4
7.0
0.0
22.2
0.5
5.4
0.0
JSP IN
1,020
175.1 / 2.4
202 / 62
10/3/17
3046
Jindal Steel and Power (JSP)’s 1QFY21 result highlights the benefit of cost
reduction in its steel operations. 1QFY21 consolidated adj. EBITDA was up
2% QoQ to INR22.6b (est.: INR18.9b).
We raise JSP’s FY21/FY22 EBITDA estimates by 6%/5% to factor cost
reduction demonstrated by the company. We expect JSP to reduce its net
debt by INR83b (INR81/sh) to INR296b over FY20–22E. The Oman
divestment would reduce debt by an additional ~INR60b. Reiterate
Buy.
Consolidated:
JSP’s 1QFY21 consolidated adj. EBITDA (adj. of insurance claim
of INR1.2b) of INR22.6b (est.: INR18.9b) was up 2% QoQ (4% YoY), led by
higher volumes and cost reduction in standalone operations. The beat on
estimates was led by lower-than-expected costs in standalone operations.
Adj. PAT stood at INR1.0b (v/s est. loss of INR1.1b).
Higher volumes and cost reduction boost EBITDA
2022E
418.1
95.7
15.2
14.9
93
339
4.5
7.5
0.0
11.5
0.5
4.9
0.0
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Jun-20 Mar-20 Jun-19
60.5
60.5
60.5
14.0
12.4
9.2
12.0
13.4
15.1
13.5
13.8
15.1
Standalone: Cost reduction and higher volumes drive 9% QoQ EBITDA growth
Revenue / adj. EBITDA / adj. PAT came in at INR61.6b/INR17.1b/INR4.1b,
+4%/+9%/+47% QoQ and +2%/+20%/+158% v/s our est. The company
received an insurance claim of INR1.2b during the quarter, which we have
considered as an exceptional gain.
Steel sales (excl. pig iron) grew 4% YoY / 11% QoQ to 1.48mt, driven by
exports (58% of total volumes), as domestic sales declined ~40% YoY.
Steel NSR declined ~INR4,600/t QoQ due to higher exports and lower value-
added sales. However, decline in derived blended realization was lower at
INR3,020/t (7%) QoQ to INR41,569/t (our est.: INR40,705/t) due to higher
sales of traded goods (~+INR1,100 QoQ).
Unitary cost declined 9% QoQ to INR30,044/t (-9% QoQ) (est.: INR31,129/t),
largely due to lower cost of iron ore and thermal coal.
With lower cost nearly offsetting lower realization, EBITDA/t declined only
2% QoQ to INR11,525/t (est.: INR9,576/t).
Adj. PAT increased 47% QoQ to INR4.1b (est.: INR1.6b).
JPL: Lower coal cost drives EBITDA growth, but volumes weaken further
FII Includes depository receipts
EBITDA increased 11% QoQ to INR3.7b (est.: INR2.9b) on lower coal cost,
implying EBITDA/unit of INR1.9 (+23% QoQ).
Gross volumes, however, declined to 2,179 MUs (-10% QoQ; -27% YoY),
implying only 29% PLF.
EBITDA declined 58% QoQ to INR1.9b (est.: INR2.3b) due to lower spreads;
EBITDA/t stood at USD51/t v/s USD120/t QoQ.
Sales volumes declined 6% QoQ to 500kt (+22% YoY).
Consolidated net debt
declined by INR13.0b QoQ to INR346b at 1QFY21-
end.
Oman: Lower spreads impact EBITDA
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Amit Murarka – Research Analyst
(Amit.Murarka@MotilalOswal.com)
Aniket Mittal – Research Analyst
(Aniket.Mittal@MotilalOswal.com)