29 January 2014
3QFY14 Results Update | Sector:
Metals
Jindal Steel & Power
BSE SENSEX
20,647
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
6,120
JSP IN
934.8
442/182
-1/19/-14
CMP: INR254
TP: INR270
Neutral
S/A & Oman’s operating performance improved; power rates dragged JPL;
GNM consolidation dragged PAT
M.Cap. (INR b) / (USD b) 237.5/3.8
Financials & Valuation (INR Billion)
Y/E MAR
Net Sales
EBITDA
Adj PAT
Gr (%)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
EV/EBITDA
( )
2014E 2015E 2016E
203.7 259.7 314.2
63.8
23.3
-33.2
11.1
9.2
10.2
1.1
8.7
78.3
25.8
27.6
10.9
11.5
9.8
9.2
1.0
7.5
96.7
32.5
34.7
25.9
12.7
11.7
7.3
0.9
5.7
Adj.EPS(INR) 24.9
JSP’s consolidated adjusted PAT increased 2% QoQ to INR5.6b. Although
consolidated EBITDA at INR17b (+9% QoQ) was 11% ahead of estimates, the
adjusted PAT was below estimates due to (1) higher interest cost, (2)
consolidation of Gujarat NRE’s Australian coking coal assets (GNM) and (3) higher
tax rate. The performance of Oman HBI unit was impressive, while Jindal Power’s
profitability was hurt by lower power rates.
Standalone revenue increased 3% QoQ helped by 3% increase in sales volumes
and 4% increase in steel realization. Pellet sales were reduced due to higher
internal consumption in steel making. Margins improved as power generation
increased 34% QoQ to 1.6b kwh.
Jindal Power’s PAT declined 11% QoQ to INR2.7b as average power realization
declined 10% QoQ to INR3.1/kwh.
Financial losses in overseas subsidiaries reduced significantly from ~INR1b in
2QFY14 to INR19m in 3QFY14 due to better performance of Oman and South
African coal mines.
New pellet plant at Barbil, Angul and Oman steel plant and Tamnar-II will drive
growth of operating cash flows as they all will be commissioned by end-FY14.
However, higher interest cost and depreciation will drag earning’s growth.
As a combined impact of GNM losses and higher interest costs, EPS is cut 9/7% for
FY14E/FY15E respectively. Net debt has increased 5% QoQ to INR315b due to
acceleration of capex. We value the stock at INR270 based on SOTP. Maintain
Neutral.
Sanjay Jain
(SanjayJain@MotilalOswal.com); +91 22 3982 5412
Pavas Pethia
(Pavas.Pethia@MotilalOswal.com); +91 22 3982 5413
Investors are advised to refer through disclosures made at the end of the Research Report.

Jindal Steel & Power
Standalone: EBITDA above estimates
Steel production up 11%
QoQ
Better performance of CPP,
steel price hike, cement and
machinery division helped
margins
Interest cost continue to
rise due to increase in
working capital
Net sales increased 3% QoQ to INR38b driven by 3% increase in steel sales
volumes to 765kt but lower pellet volumes. Exports increased 9% QoQ (+7%
YoY) to 150kt. Average steel realization increased 4% YoY.
Steel production increased 11% QoQ (+6% YoY) to 820kt helped by Steel melt
shop and plate mill at Angul. Captive power generation increased 34% QoQ to
1,629Mkwh.
Adjusted EBITDA increased 12% QoQ to INR12b. EBITDA margins improved
240bps QoQ to 32% due to better margins in captive power generation and
increased contribution from cement and machinery division.
Steel EBIT declined 2% QoQ (- 25% YoY) to INR6.3b. Power EBIT increased 60%
QoQ to INR1.9b due to 34% increase in power generation. EBIT contribution
from other segments increased 41% QoQ to INR1b due to increase in cement
and machinery sales.
Interest expenses increased 10% QoQ to INR3.7b (vs. est. of INR2.8b) due to
higher working capital during the quarter.
Adjusted PAT was 17% ahead of estimates at INR3.7b (+2% QoQ).
FY14
2Q
740
639
116
36,556
1.9
10,833
-14.1
29.6
3,337
3,036
56
4,516
-1,000
3,516
950
27.0
2,567
3,567
-38.7
FY13
3Q
4QE
801
2,843
2,829
3,202
3,672
517
2,112
3,949
3,513
2,890
476
2,251
1,381
1,415
1,077
39,860 149,547 148,435 177,694 204,325
-5.4
12.2
-0.7
19.7
15.0
10,686 47,127 44,094 48,394 54,406
-6.0
4.6
-6.4
9.8
12.4
26.8
31.5
29.7
27.2
26.6
3,887
9,209 13,208 18,640 20,084
3,205 10,485 12,263 15,283 15,969
1,526
1,593
1,653
2,053
2,091
5,119 29,026 20,276 16,524 20,444
0 -6,741 -3,000
5,119 22,285 17,276 16,524 20,444
1,433
6,360
4,979
4,627
5,724
28.0
28.5
28.8
28.0
28.0
3,686 15,926 12,297 11,897 14,719
3,686 21,404 15,297 11,897 14,719
-36.2
-11.1
-28.5
-22.2
23.7
Source: MOSL, Company
FY14E
FY15E
FY16E
Quarterly Performance (Standalone)
Y/E March
FY13
1Q
2Q
3Q
Sales volume
Steel (000 tons )
561
639
734
Pel l ets (000 tons )
395
436
623
CPP (M kwh)
584
547
603
Net Sales
33,311 35,890 38,209
Cha nge (YoY %)
31.8
7.7
15.8
EBITDA
10,377 12,607 12,781
Cha nge (YoY %)
7.7
6.2
22.3
As % of Net Sa l es
31.2
35.1
33.4
Interes t
2,186
1,779
2,876
Depreci a ti on
2,372
2,489
2,543
Other Income
122
74
39
PBT (before EO item)
5,942
8,413
7,401
Extra -ordi na ry Income
-5,741
0
0
PBT (after EO item)
201
8,413
7,401
Tota l Ta x
76
2,591
2,196
% Ta x
38.1
30.8
29.7
Reported PAT
124
5,822
5,205
Adjusted PAT
4,602
5,822
5,205
Cha nge (YoY %)
-2.1
-9.5
1.8
4Q
909
658
517
42,137
1.0
11,363
-13.2
27.0
2,369
3,081
1,358
7,271
-1,000
6,271
1,496
23.9
4,774
5,774
-26.3
1Q
665
551
384
34,252
2.8
10,477
1.0
30.6
2,318
3,036
63
5,185
-2,000
3,185
796
25.0
2,389
4,389
-4.6
765
525
300
37,767
-1.2
12,098
-5.3
32.0
3,667
2,985
9
5,456
0
5,456
1,800
33.0
3,656
3,656
-29.8
Angul steel and Barbil pellet projects are on track to be commissioned by Feb
2014 provided execution of water supply works are not disrupted again.
Angul steel plant is expected to achieve capacity utilization of 60% in FY15. We
are however factoring 30-40% capacity utilization keeping in mind potential
teething problems with new technology of coal gasification in steel making and
supply of coal.
JSPL has spent INR44b during 9mFY14 in standalone business. The capex so far
has been ahead of guidance.
29 January 2014
2

Jindal Steel & Power
Performance of overseas operations improved led by Oman HBI unit
GNM consolidation dragged
the earnings
Oman plant saw robust growth in HBI sales by 35% YoY to 500kt helped by
destocking. HBI production remained flat YoY at 377kt as plant is already
running at full capacity.
Production of coal too improved by 21% YoY to 182kt at South African mines.
JSPL acquired majority stake (64-65%) in Gujarat NRE Australia (GNM) w.e.f.
Nov. 16, 2013. The integration of 45days financials negatively impacted the PAT
by INR687m.
On excluding the impact of GNM consolidation, the loss after tax from overseas
subsidiaries reduced significantly to INR19m.
FY14
2Q
367
97
2,149
14,347
9.7
5,530
-8.6
38.5
19
1,302
-1,067
3,143
0
3,143
390
12.4
2,753
83
158
2,828
-26.2
6
2,184
11,151
-18.6
4,575
-17.7
41.0
357
1,180
470
3,508
0
3,508
884
-15.5
2,624
136
66
2,554
-31.5
-662
2,099
13,282
24.6
4,735
8.7
35.7
468
1,302
-207
2,758
0
2,758
775
-8.4
1,983
92
63
1,954
-38.0
-1,052
FY13
3Q
499
182
99
187
2,116
16,007
63.2
4,909
-4.1
30.7
630
1,614
69
2,734
0
2,734
798
38.4
1,936
-127
-104
1,959
-43.5
-706
4QE
350
200
150
412
2,190
14,790
3.1
5,474
-1.0
37.0
630
1,934
-532
2,378
0
2,378
931
138.5
1,448
134
190
1,503
-46.8
-2,262
1,520
900
7,968
48,521
-0.5
20,559
-21.9
42.4
-626
4,908
-229
16,049
0
16,049
2,859
69.3
13,191
417
402
13,176
-24.6
2,049
1,565
540
60
0
800
1,200
900
900
900
346
800
1,000
651
2,216
3,244
8,585 12,855 18,046
55,230 81,984 109,899
13.8
48.4
34.0
19,693 29,902 42,280
-4.2
51.8
41.4
35.7
36.5
38.5
2,085
5,199
8,915
6,029
8,883 11,422
-200
900
1,163
11,378 16,719 23,106
0
0
0
11,378 16,719 23,106
3,387
3,905
5,826
29.8
23.4
25.2
7,991 12,814 17,279
235
-682
-75
215
402
402
7,971 13,898 17,757
-39.5
74.4
27.8
-4,682
45
561
Source: MOSL, Company
FY14E
FY15E
FY16E
Quarterly Performance (Subsidiaries and Associates)
Y/E March
FY13
1Q
2Q
3Q
Sales volume (kt)
Oma n HBI
337
Oma n Steel
South Afri ca coa l
Moza mbi que coa l
GNM coki ng coa l
Power gen. (Mkwh)
2,166
1,878
1,775
Net Sales
13,704 10,663
9,807
Cha nge (YoY %)
-3.3
-2.1
-7.4
EBITDA
5,555
4,358
5,116
Cha nge (YoY %)
-16.1
-29.4
-31.5
As % of Net Sa l es
40.5
40.9
52.2
Interes t
-325
-191
-130
Depreci a ti on
1,157
1,201
1,247
Other Income
54
712
73
PBT (before EO item)
4,777
4,059
4,071
Extra -ordi na ry Income
0
0
0
PBT (after EO item)
4,777
4,059
4,071
Tota l Ta x
1,046
846
576
% Ta x
21.9
20.8
14.2
Reported PAT
3,731
3,212
3,495
Mi nori ty i nteres t
113
117
105
As s oci a te
111
55
78
Adjusted PAT
3,729
3,151
3,468
Cha nge (YoY %)
-16.9
-22.4
-32.0
adjusted PAT (Ex JPL)
585
548
911
4Q
1Q
Expect Oman EBITDA
to double
GNM will require capital
infusion of at least
AUD200-300m
Oman steel plant is expected to get commissioned by end of FY14. We expect
steel melt shop to achieve 800kt of steel production, which will correspondingly
reduce the HBI sales. As a result, we expect Oman EBITDA to nearly double to
~INR8b in FY15.
GNM suffers from working capital shortage. Both receivables and payables are
exceptionally high. It will perhaps be challenging to recover receivable due to
poor financial health of its customers, while payable will need to be addressed
with urgency in order to achieve production ramp up. Although GNM will
improve its margins and volumes gradually, there will still be need of ~AUD200-
300m in addition to capex. Once the working capital related issues are tackled,
GNM will outline growth plan.
The consolidation of GNM has increased net debt by ~USD500m.
3
29 January 2014

Jindal Steel & Power
Jindal Power: lower rates dragged PAT
2 Unit of 600MW
also completed.
nd
The 1,000MW power plant operated at 96% PLF and generated 2.116b kwh.
Estimated power sales were 1.968 kwh.
Average power realization was down 10% QoQ to INR3.1/kwh (-9% YoY).
EBIT level cost of power generation declined marginally by 4% to INR1.2/kwh.
PAT decreased 11% QoQ to INR2.7b.
Tamnar-2: 1st unit of 600MW was synchronized on 30th September and 2
nd
unit
too has been completed. 3rd unit is expected to be commissioned by Mar 2014
respectively. Power sales are expected to start in 4QFY14.
Quarterly Performance (Jindal Power)
Y/E March
1Q
Ca pa ci ty
1,000
PLF
99%
Gros s genera ti on (MU)
2,166
Es t. Power s a l es (MU)
2,015
Net Sales
7,505
(INR/kwh)
3.7
Expenditure (incl. dep.)
3,412
(INR/kwh)
1.58
EBIT
4,093
(INR/kwh)
2.0
Reported PAT
3,144
FY13
2Q
1,000
85%
1,878
1,746
5,651
3.2
1,289
0.69
4,362
2.5
2,603
3Q
1,000
81%
1,775
1,651
5,576
3.4
1,993
1.12
3,582
2.2
2,558
4Q
1,000
100%
2,149
1,999
6,366
3.2
2,948
1.37
3,418
1.7
2,822
1Q
1,000
100%
2,184
2,000
6,467
3.2
2,529
1.16
3,938
2.0
3,217
FY14
2Q
1,000
95%
2,099
1,952
6,649
3.4
2,611
1.24
4,039
2.1
3,006
FY13
3Q
1,000
96%
2,116
1,968
6,058
3.1
2,536
1.20
3,522
1.8
2,666
4QE
1,000
100%
2,190
2,037
6,517
3.2
2,592
1.18
3,926
1.9
3,765
1,000
91%
7,968
7,411
25,097
3.3
9,642
1.21
15,455
2.1
11,126
FY14E
1,000
98%
8,585
7,984
25,691
3.3
10,266
1.20
15,425
1.9
12,653
(INR Million)
vs Est
3QE
(%)
1,000
98%
2,146
-1
1,996
-1
6,387
-5
3.2
-4
2,574
-1
1.20
0
3,813
-8
1.9
-6
3,675
-27
Source: Company, MOSL
SUM OF THE PART VALUATIONS
Equity Valuation
Business
Iron & Steel
add: CWIP
Les s : net debt
add: Jindal Power
SOTP
s teel + CPP
Steel
s teel + CPP
Power
Method
FY15E EV/EBITDA
at dis count
DCF
Valuation
multiple
6.0
0.60
Value
Rationale
(INR m) (INR/sh)
338,480
362 In-line with s ector practice
24,444
26 40% dis count bas ed on our report dated 7th Jan, 2013
279,201
299 net cons olidated debt (Except Jindal power)
168,520
180
252,243
270
Source: MOSL
29 January 2014
4

Jindal Steel & Power
Jindal Steel & Power: an investment profile
Company description
Jindal Steel and Power (JSP) has 3m tons of operational
steel-making capacity at Raigarh. It has one of the best
iron ore and coal resources in India, with assets spread
over various mineral-rich countries. JSPL has captive
mines and long term arrangements for sourcing iron ore
in India and coal resources overseas, mainly in
Mozambique, South Africa, Australia, India and
Indonesia.
Key investment risks
Unexpected fall in steel prices and delay in project
execution would adversely impact earnings.
2
nd
600MW unit of Tamnar-II project has been
completed
We value the stock at INR270 based on SOTP.
Maintain
Neutral.
Steel demand has bottomed out in western world,
yet the recovery remains gradual. On the other
hand steel demand fundamentals have further
weakened in China, India and other Asian
countries. We believe that gradual recovery in
western world will be over shadowed by weakness
in Asian markets who have been greater driver of
raw material prices. Since iron ore and coking coal
prices are still trading at significantly above
marginal cost of production, the risk to price
correction is high.
Merchant power market is subdued due to weak
demand. Although power deficit region of South
India has now been connected to grid, the
bottlenecks still remain for merchant power.
Recent developments
Valuation and view
Key investment arguments
Sector outlook
Steel and captive power business has low cost of
production and superior margins due to benefit of
integrated operation, captive iron ore & coal mines
and pellet plant.
Merchant power plant of 1000MW has the lowest
cost of power generation in India due to proximity
to captive power generation.
Oman HBI plant has benefit of low cost gas and
proximity of supply deficit end product market of
Middle East.
JSPL has been investing in expanding steel and
power capacity. The benefit of new 2400MW,
1.6mtpa Angul steel plant, 4.5mtpa second pellet,
and forward integration at Oman will start kicking in
during FY15 onwards.
Comparative valuations
P/E (x)
P/BV (x)
EV/Sales (x)
EV/EBITDA (x)
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
JSP
10.2
9.2
1.1
1.0
2.7
2.3
8.7
7.5
SAIL
10.2
10.0
0.6
0.6
1.1
1.1
9.3
8.2
TATA STEEL
9.0
7.8
1.5
1.3
0.7
0.7
6.5
5.9
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY14
FY15
24.9
27.6
Consensus
Forecast
24.5
24.2
Variation
(%)
1.8
14.3
Target price and recommendation
Current
Price (INR)
254
Target
Price (INR)
270
Upside
(%)
6.3
Reco.
Neutral
Shareholding pattern (%)
Promoter
Domestic Inst
Foreign
Others
Dec-13
59.7
4.7
22.8
12.8
Sep-13
59.1
6.2
22.2
12.5
Dec-12
59.0
6.0
23.8
11.2
Stock performance (1-year)
29 January 2014
5

Jindal Steel & Power
Financials and valuation
Income statement
Y/E March
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Min. Int. & Assoc. Share
Adj Cons PAT
2013
198.1
8.8
65.7
33.2
15.4
50.3
7.6
1.4
-5.7
38.3
9.2
24.0
29.1
34.9
-14.9
0.0
34.8
2014E
203.7
2.8
63.8
31.3
18.3
45.5
15.3
1.5
-3.0
28.7
8.4
29.2
20.3
23.3
-33.2
0.0
23.3
(INR Billion)
2015E
259.7
27.5
78.3
30.2
24.2
54.1
23.8
3.0
0.0
33.2
8.5
25.7
24.7
24.7
6.1
1.1
25.8
2016E
314.2
21.0
96.7
30.8
27.4
69.3
29.0
3.3
0.0
43.5
11.6
26.5
32.0
32.0
29.5
0.5
32.5
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2013
37.3
53.7
227.3
1.6
4.4
6.8
4.7
1.1
2.4
7.3
0.6
17.7
12.4
0.4
36.0
83.4
86.5
1.2
2014E
24.9
44.5
222.7
2.0
8.3
10.2
5.7
1.1
2.7
8.7
0.8
11.1
9.2
0.4
32.3
68.5
110.1
1.5
2015E
27.6
53.4
256.1
2.0
7.4
9.2
4.8
1.0
2.3
7.5
0.8
11.5
9.8
0.4
38.7
64.9
103.0
1.5
2016E
34.7
64.0
290.6
2.0
5.9
7.3
4.0
0.9
1.7
5.7
0.8
12.7
11.7
0.5
40.8
62.3
99.9
1.1
Balance sheet
Y/E March
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
2013
0.9
211.6
212.5
246.2
13.4
477.6
267.0
74.3
192.7
192.3
8.1
176.0
45.2
19.5
2.0
109.3
93.1
31.4
61.7
83.0
477.6
2014E
0.9
207.2
208.1
318.7
14.4
547.2
316.5
92.6
223.9
252.3
8.1
165.2
38.2
18.1
-0.3
109.3
103.9
42.2
61.7
61.3
547.2
(INR Billion)
2015E
2016E
0.9
0.9
238.5
270.7
239.4
271.6
349.2
334.2
15.3
16.4
613.9
632.0
537.5
614.7
114.1
137.8
423.4
476.9
110.8
45.2
8.1
8.1
184.6
223.3
46.2
53.6
27.5
35.1
1.7
25.3
109.3
109.3
114.6
123.0
51.2
59.6
63.4
63.4
70.0
100.3
613.9
632.0
E: MOSL Estimates
Cash flow statement
Y/E March
OP/(Loss) before Tax
Depreciation
Others
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg Cap
CF from Op. Activity
(Inc)/Dec in FA & CWIP
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax)
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2013
38.3
15.4
-1.4
7.6
-7.8
-21.6
36.8
-99.5
-4.3
0.0
-103.8
0.0
75.3
-7.6
-1.5
67.5
0.5
1.5
2.0
2014E
28.7
18.3
-1.5
15.3
-6.7
19.4
50.5
-109.5
0.0
0.0
-109.5
0.0
73.5
-15.3
-1.9
57.7
-1.3
2.0
0.7
(INR Billion)
2015E
33.2
24.2
-3.0
23.8
-7.6
-6.8
73.8
-79.5
0.0
0.0
-79.5
0.0
30.5
-23.8
-1.9
7.7
1.9
0.7
2.7
2016E
43.5
27.4
-3.3
29.0
-10.4
-6.7
77.8
-11.6
0.0
0.0
-11.6
0.0
-15.0
-29.0
-1.9
-42.7
23.6
2.7
26.3
29 January 2014
6

Jindal Steel & Power
NOTES
29 January 2014
7

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