Jindal Steel and Power
Estimate change
TP change
Rating change
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 (%)
2021E
388.6
147.6
62.7
61.4
-1,246
312
19.6
16.7
0.0
7.3
1.4
4.6
0.0
2022E
470.4
150.0
68.3
66.9
9
379
19.4
17.2
0.0
6.7
1.2
4.2
0.0
2023E
466.7
130.4
57.9
56.7
-15
436
13.9
14.0
0.0
7.9
1.0
4.5
0.0
14 May 2021
4QFY21 Results Update | Sector: Metals
CMP: INR457
Deleveraging to continue on strong earnings
Announced Steel capex improves the growth outlook
JSP IN
1,020
465.8 / 6.3
502 / 84
16/97/352
3275
TP: INR550 (+20%)
Buy
JSP achieved its highest ever Steel EBITDA/PAT of INR48.8b/INR27.7b in
4QFY21, supported by a strong pricing environment. Consolidated net debt
fell further by INR34.7b QoQ to INR224b, implying a net debt/EBITDA of
1.53x.
It has announced an INR180b capex at Angul to expand its Steel capacity by
85% to 15.9mtpa by FY25, at a very competitive cost of ~USD390/t.
With the proposed sale of Jindal Power (JPL), JSP would become a pure play
Indian Steel company, which should also aid in better value discovery as the
Steel business is still under-valued at 4.1x FY23E EV/EBITDA.
We raise our FY22E/FY23E EBITDA by 15%/11% to factor in strong Steel
prices. Despite the announced capex, we expect net debt to fall further to
INR126b (excluding the ~INR50b net debt reduction from the Power
divestment) by Mar’23E. Reiterate
Buy.
JSP reported strong 4QFY21 earnings, with consolidated revenue/adjusted
EBITDA/PAT rising 13%/15%/23% QoQ to INR119b/INR52.9b/INR29.4b (est.
+3%/+1%/+18%).
Steel (standalone)
revenue/EBITDA/PAT
rose 19%/25%/16% QoQ to
INR104.3b/INR48.8b/INR27.7b (est. +6%/+3%/+4%).
Steel sales (excluding pig iron) rose 2% QoQ to 1.81mt (+36% YoY). Pellet
sales declined 28% QoQ to 0.29mt due to higher internal consumption.
Blended Steel realization improved by ~INR8,452 (17%) QoQ to INR57,481
(est. INR54,794/t) due to better than expected product mix. However, the
increase in realization was partly offset by higher iron ore cost and other
expenses. As a result, EBITDA/t improved by 23% QoQ to INR26,915 (est.
INR26,318) – including ~INR6,000/t benefit from the utilization of Sarda iron
ore inventory, which gets exhausted in 1QFY22.
Power (subsidiary JPL)
EBITDA increased 4% YoY to INR3.5b, even as revenue
rose 50%, due to a likely write-off of surcharge receivable as reported in
3QFY21. Sales volume PLF declined to 53% (v/s 56% in 3QFY21). Realization
improved 2% QoQ to INR3.8/kwh. EBITDA/kwh came in at INR1/kwh.
Consolidated net debt (reported) declined further by INR34.7b QoQ to
INR224b, implying a net debt/EBITDA of 1.53x.
Standalone revenue/EBITDA/PAT grew 27%/123%/10x YoY in FY21 to
INR332b/INR129b/INR66b on the back of greater (~21%) Steel sales (6.9mt),
higher Steel prices, and benefit from free of cost Sarda iron ore inventory.
Consolidated OCF/FCF stood at INR120b/INR111b in FY21, up 4%/13% YoY.
Highest ever EBITDA/PAT on the back of strong Steel margin
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-21 Dec-20 Mar-20
60.5
60.5
60.5
16.9
15.4
12.4
11.0
11.5
13.4
11.6
12.6
13.8
FII Includes depository receipts
Announced capacity expansion, deleveraging continues
JSP has announced an expansion of its 6mtpa Angul plant to 13mtpa by FY25
– 1mtpa through debottlenecking in FY22 and a 6.3mtpa brownfield
expansion in phases by FY25.
Amit Murarka - Research analyst
(Amit.Murarka@motilaloswal.com)
Research analyst - Basant Joshi
(Basant.Joshi@motilaloswal.com);
Jayant Gautam
(Jayant.Gautam@motilaloswal.com)
14 May 2021
1
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Investors are advised to refer through important disclosures made at the last page of the Research Report.