4 November 2014
2QFY15 Results Update | Sector:
Metals
Jindal Steel & Power
BSE SENSEX
27,860
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
8,324
JSP IN
914.9
350/128
-5/-54/-63
CMP: INR170
TP: INR198
Neutral
Operating performance in-line sans Wollongong coal mine
Consolidated EBITDA increased 1% QoQ to INR16.4b driven by better performance
of Jindal Power and Oman steel plant. WCL, Australia continues to incur heavy
losses. Standalone EBITDA was on expected line but for forex gains.
Raigarh steel plant’s capacity expansion to 3.6mtpa was completed in September,
while CGP and DRI units achieved 60% CU despite challenges in sourcing coal.
Pellet plant’s capacity utilization remained low at 50% due to shortage of iron ore.
PLF and rates improved at Jindal Power:
Jindal power achieved 22% QoQ growth
in power generation and EBITDA to INR5.2b. Power rates increased 8% QoQ to
INR3.56/kwh and EBITDA per unit remained flat QoQ at INR2/kwh.
PAT boosted by lower depreciation:
Depreciation declined 3% QoQ to INR6.5b
despite capitalization of new facilities. Pursuant to Companies’ act 2013, the
useful life of equipments has been recalculated. As a result, the PAT is higher by
INR397m. Consolidated PAT increased 6% QoQ to INR4.4b due to lower tax rate.
No provisioning for coal blocks:
JSPL has filed review petition in Supreme Court
regarding de-allocation of coal block and levy of INR295/ton of coal mined since
inception. Therefore, JSPL has not provided for it in the accounts.
Uncertain outlook:
The outlook remains uncertain due to de-allocation of coal
blocks and risk to long term iron ore supply pursuant to unfavorable observations
of recent CEC report on Sarda mines. We expect aggressive bidding for Gare Palma
coal blocks by number of steel and power units in Chhattisgarh and west Odisha.
Iron ore supply too will remain tight in Odisha/Jharkhand leading to higher costs.
Maintain Neutral:
We expect consolidated EBITDA to grow at CAGR of 13% over
FY14-17. Iron ore and coal availability/price and power PPA/FSA are potential risk
to our estimates. Stock is trading at FY16 PE of 8.3x and EV/EBITDA of 7.4x.
M.Cap. (INR b) / (USD b) 155.7/2.5
Financials & Valuation (INR Billion)
Y/E MAR
Net Sales
EBITDA
Adj PAT
EPS (INR)
Gr. (%)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
EV/EBITDA(X)
2015E 2016E 2017E
227.0 282.7 321.3
71.8
18.4
20.1
-3.5
8.4
7.1
8.0
0.7
7.8
74.9
17.7
19.4
-3.9
8.1
6.8
8.3
0.6
7.4
82.7
21.3
23.3
20.3
9.0
7.8
6.9
0.6
6.5
Sanjay Jain
(SanjayJain@MotilalOswal.com); +91 22 3982 5412
Dhruv Muchhal
(Dhruv.Muchhal@MotilalOswal.com); +91 22 3027 8033
Investors are advised to refer through disclosures made at the end of the Research Report.

Jindal Steel & Power
Consolidated results dragged by global ventures
Consolidated EBITDA increased 1% QoQ to INR16.4b driven by better
performance of Jindal Power and Oman steel plant. WCL, Australia continues to
incur heavy losses due to operational reasons. Standalone results were on
expected line but for forex gains.
Interest expense increased 12% QoQ to INR6b due to capitalization of CGP, DRI
units at Angul and Oman steel plant expansion. Net debt has increased by
INR24b to INR377b, while the capex was INR30b during 1HFY15.
Depreciation declined 3% QoQ to INR6.5b despite capitalization of new facilities.
Pursuant to Companies’ act 2013, the useful life of equipments has been
recalculated. As a result, the PAT is higher by INR397m.
Consolidated PAT increased 6% QoQ to INR4.4b due to lower tax rate. There
was reversal of tax in the standalone operations.
JSPL has filed review petition in Supreme Court against latter’s recent judgment
regarding de-allocation of coal block and levies of INR295/ton of coal mines
since inception. Therefore, JSPL has not provided for it in the accounts.
Standalone: operationally in-line despite challenges
Net sales declined 6% YoY to INR34.2b despite increase in NSR by 4.6% YoY.
There were major challenges due to weak demand during Monsoon, port
congestion, and poor availability of rakes. Steel sales declined 1% YoY to 730kt.
Pellet sales declined 62% YoY to 241kt.
Steel production was affected on account of up gradation program at Raigarh -
8% lower QoQ (unchanged YoY) to 740kt. The capacity has increased from
3mtpa to 3.6mtpa at by end of September 2014.
Exhibit 1: Standalone: steel production and sales (kt)
Source: Company, MOSL
Coal gasification plant (CGP) and DRI units at Angul achieved 60% capacity
utilization. There were major challenges in sourcing of coal for CGP.
Pellet plants’ capacity utilization too remained low at 50% due to shortage of
iron ore. Sarda mines, long term supplier, are still closed.
Retail business increased 3x YoY in 1HFY15 and the total number of dealers have
increased to 1550 on country wide basis.
EBITDA increased 1.8% YoY to INR11b. The EBITDA was 8% ahead of our
estimates largely due to forex gain of INR1.38b.
4 November 2014
2

Jindal Steel & Power
Exhibit 2: Standalone: Pellet production and sales (kt)
Source: Company, MOSL
Consumption of raw materials remained unchanged QoQ at INR10b and it was
affected by surge in iron ore prices in Odisha and Jharkhand region.
Depreciation increased 7% QoQ to INR4.5b due to capitalization of facilities at
Angul and Raigarh. Pursuant to Companies’ act 2013, the useful life of
equipments has been recalculated. As a result, the PAT is higher by INR542m.
(INR Million)
Exhibit 3: Quarterly Performance (Standalone)
Source: Company, MOSL
Jindal Power: utilization improved; EBITDA up 22% QoQ driven by volumes
Power generation increased 14% QoQ to 2799 Mkwh helped by generation
ramp up at Tamnar-2 (3x600MW). Tamnar-2 reported PLF of 18%, while
Tamnar-1 (1000MW) reported 95% PLF. On total operational capacity of
2800MW, the PLF improved by 6 percentage point QoQ to 46%.
There were challenges in securing coal despite linkages for first 2 units of
600MW. For remaining 2 units of 600MW, the government has committed to
provide linkages by March 2015.
Power realization (at estimated 7% internal consumption) increased 8% QoQ to
3.56/kwh.
EBITDA increased 22% QoQ to INR5.2b. EBITDA per unit remained flat QoQ at
INR2/kwh.
4 November 2014
3

Jindal Steel & Power
Exhibit 4: Jindal Power: Realization and PAT
Source: Company, MOSL
Tamnar-I (1000MW)
operated at 95% PLF and
Taman-2 (1800MW)
operated at 18% PLF
Exhibit 5: Jindal Power: Generation and PLF
Source: Company, MOSL
Exhibit 6: Quarterly Performance (Jindal Power)
(INR Million)
Source: Company, MOSL
Other subsidiaries (global ventures) performance
2mtpa Oman steel plant achieved commercial production during the quarter.
The turnover and PAT increased 32% and 104% YoY. HBI production however
declined by 6% YoY to 356kt. Oman reported EBITDA of USD38m.
WCL, Australia continues to make losses (-ve USD25m EBITDA) due to
operational reasons as well as low coking coal prices. WCL produced 55kt and
sold 86kt coal.
4
4 November 2014

Jindal Steel & Power
South Africa coal mines’s operations were stable with production and sales of
229kt and 246kt. It reported EBITDA of USD2.06m.
Mozambique produced and sold 109kt and 116kt coal respectively. Sales were
USD9.18m, while EBITD was USD2.17m.
Despite improvement in the PAT of Oman steel plant, the net losses from global
ventures increased 69% QoQ (-32% YoY) to INR1.4b.
(INR Million)
Exhibit 7: Quarterly Performance (Subsidiaries)
Source: Company, MOSL
4 November 2014
5

Jindal Steel & Power
Exhibit 8: Income Statement
Y/E March
Net sales
Steel segment
Standalone
Steel sales (kt)
Pellet sales (kt)
Shadeed
HBI (kt) production
Steel (kt) sales
Wollongong (GNM)
Coking coal (kt)
Others
Jindal power
Sales (Mkwh)
EBITDA
Steel segment
Standalone
EBITDA/t of steel
Shadeed
EBITDA/t of HBI
Wollongong (GNM)
EBITDA/t of coal
Others
Jindal power
EBITDA (INR/kwh)
FY12
FY13
FY14
FY15E
FY16E
FY17E
182,086 198,068 200,040 226,999 282,749 321,264
151,683 172,971 175,473 192,397 227,730 237,363
133,340 149,547 145,440 155,134 188,276 197,908
2,385
2,843
2,935
3,321
3,849
4,326
1,995
2,112
2,035
2,019
4,095
3,132
27,961 29,012 32,621 37,740 40,860 40,860
1,200
1,520
1,468
1,500
1,500
1,500
800
1,200
1,200
1,183
1,183
1,183
317
400
400
-9,618
-5,588
-2,588
-1,660
-2,588
-2,588
30,404 25,097 24,568 34,602 55,019 83,901
7,750
7,411
7,984 10,428 15,551 24,603
68,868 65,685 57,764 71,773 74,885 82,675
46,055 47,773 40,941 50,839 49,802 50,891
42,297 45,126 39,996 46,750 43,691 44,765
17,733 15,872 13,625 14,076 11,351 10,349
3,524
4,903
3,404
7,688
8,356
8,301
2,936
3,226
2,318
5,125
5,571
5,534
135
215
285
538
712
235
-2,256
-2,460
-3,734
-2,460
-2,460
22,813 17,912 16,823 20,933 25,083 31,784
2.9
2.4
2.1
2.0
1.6
1.3
(INR Million)
Remarks
assumed steel prices are stable
Cagr growth of 11% over FY14-17
Angul driving steel volumes at 14%cagr
Pellet capacity doubled to 9mtpa in FY15
Cagr growth of 51% over FY14-17
T2 driving vol. in FY15-17
Cagr growth of 8% over FY14-17
Margins diluting
Margins improving (forward integration)
GNM to turn around
Cagr growth of 24% over FY14-17
T2 is margin dilutive
Source: MOSL
Exhibit 9: Target price
YEAR
Steel Business
A. EBITDA
B. Target EV/EBITDA(x)
C. EV (AxB)
Jindal Power (JPL)
D. PV of JPL's FCFF
Consolidated
EBITDA
E. Enterprise Value (C+D)
F. Net Debt
G. CWIP
H. Discount on CWIP (%)
Equity Value (E-F+G*(1-H%))
Target price (INR/share)
FY12
46,055
FY13
47,773
FY14
40,941
FY15E
50,839
6.5
330,455
207,459
68,868
169,416
136,520
65,685
57,764
71,773
537,914
413,170
103,274
228,018
249
(INR Million)
FY16E
49,802
5.5
273,912
213,054
74,885
486,966
404,106
98,123
FY17E
50,891
5.5
279,900
214,634
82,675
494,534
389,444
114,978
244,180 353,529
192,303 178,112
180,983
220,069
198
241
Source: Company, MOSL
4 November 2014
6

Jindal Steel & Power
Jindal Steel & Power: an investment profile
Company description
Jindal Steel and Power (JSP) has steel-making capacity
of 3mtpa at Raigarh, 1.5mtpa at Angul and 2mtpa at
Shadeed Oman. It has one of the best iron ore and coal
resources in India, with assets spread over various
mineral-rich countries. JSPL has captive iron ore mines.
It also has multiple coal resources overseas, mainly in
Mozambique, South Africa, Australia and Indonesia.
Key investment risks
Unexpected fall in steel prices and volatility in key
inputs e.g. coal, iron ore prices are key risks.
De-allocation of coal blocks allocated to the
company which would now be auctioned.
Preliminary CBI inquiry into clearance for its iron ore
and coal blocks.
We value the stock at INR198 based on SOTP.
Maintain
Neutral.
While India domestic steel demand has been weak,
we expect recovery in 2H. Automotive sales and
cement production has surged double digit which
augurs well for revival of domestic steel demand.
Chinese steel sector is struggling with overcapacity
and slowing demand. This coupled with lower iron
ore and coking coal prices has lead to major price
competition from Chinese steel mills leading to
surge in steel imports to India.
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
Key investment arguments
Valuation and view
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.
Sector outlook
Comparative valuations
P/E (x)
P/BV (x)
EV/Sales (x)
EV/EBITDA (x)
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
FY15E
FY16E
Jindal Steel
8.4
8.8
0.7
0.7
2.5
2.0
7.9
7.5
TATA STEEL
12.9
8.9
1.5
1.3
0.8
0.8
6.8
6.2
SAIL
9.6
9.1
0.8
0.7
1.2
1.1
7.8
6.9
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY15
FY16
20.1
19.4
Consensus
Forecast
23.3
25.6
Variation
(%)
-13.8
-24.3
Target price and recommendation
Current
Price (INR)
170
Target
Price (INR)
198
Upside
(%)
16.5
Reco.
Neutral
Shareholding pattern (%)
Sep-14
Promoter
DII
FII
Others
60.5
4.5
21.4
13.6
Jun-14
60.4
4.8
22.4
12.4
Sep-13
59.1
6.2
21.3
13.3
Stock performance (1-year)
Jindal Steel & Power
380
310
240
170
100
Nov-13
Sensex - Rebased
Note: FII Includes depository receipts
Feb-14
May-14
Aug-14
Nov-14
4 November 2014
7

Jindal Steel & Power
Financials and valuation
Income statement
Y/E Mar
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
2014
200.0
1.0
57.8
28.9
18.3
39.5
15.0
0.7
0.0
25.1
6.2
24.6
18.9
18.9
-45.7
0.2
19.1
2015E
227.0
13.5
71.8
31.6
26.7
45.0
22.8
1.3
0.0
23.6
6.4
27.3
17.2
17.2
-9.4
1.3
18.4
(INR Billion)
2016E
282.7
24.6
74.9
26.5
28.4
46.5
24.4
0.2
0.0
22.4
6.6
29.4
15.8
15.8
-7.8
1.9
17.7
2017E
321.3
13.6
82.7
25.7
30.8
51.9
29.6
4.7
0.0
27.0
7.7
28.5
19.3
19.3
21.9
2.0
21.3
Ratios
Y/E Mar
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)
2014
20.9
40.9
247.1
1.6
7.9
7.7
3.9
0.7
2.5
8.7
1.0
8.7
7.3
0.3
32.3
89.1
126.2
1.6
2015E
20.1
49.4
231.7
1.6
9.3
8.0
3.3
0.7
2.5
7.8
1.0
8.4
7.1
0.3
34.2
86.2
107.9
2.0
2016E
19.4
50.4
248.7
1.6
9.7
8.3
3.2
0.6
2.0
7.4
1.0
8.1
6.8
0.4
33.3
87.6
111.2
1.8
2017E
23.3
56.9
269.7
1.6
8.0
6.9
2.8
0.6
1.7
6.5
1.0
9.0
7.8
0.4
33.7
86.9
104.7
1.6
Balance sheet
Y/E Mar
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
2014
0.9
225.2
226.1
363.7
14.7
615.3
466.6
122.7
344.0
178.1
3.4
209.3
48.8
17.7
10.2
132.6
125.4
49.2
76.2
83.9
615.3
2015E
0.9
211.1
212.0
418.7
15.4
655.6
601.5
149.4
452.1
103.3
3.4
213.0
53.6
21.3
5.5
132.6
122.1
45.9
76.2
90.9
655.6
(INR Billion)
2016E
2017E
0.9
0.9
226.6
245.8
227.6
246.8
438.7
458.7
15.9
16.4
690.2
728.3
639.2
649.2
177.8
208.5
461.4
440.6
98.1
115.0
3.4
3.4
260.8
308.0
67.9
76.5
25.8
29.7
34.6
69.2
132.6
132.6
139.6
144.7
63.3
68.5
76.2
76.2
121.3
163.4
690.2
728.3
E: MOSL Estimates
Cash flow statement
Y/E Mar
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
2014
25.1
18.3
-0.7
15.0
-4.9
7.2
60.0
-141.5
4.7
-12.7
-149.5
-4.0
117.5
-15.0
-1.5
97.7
8.2
2.0
10.2
2015E
23.6
26.7
-1.3
22.8
-5.8
-11.6
54.3
-60.0
0.0
-30.8
-90.8
0.0
55.0
-22.8
-1.7
31.9
-4.6
10.2
5.5
(INR Billion)
2016E
22.4
28.4
-0.2
24.4
-6.1
-1.3
67.5
-32.6
0.0
0.0
-32.6
0.0
20.0
-24.4
-1.7
-5.8
29.1
5.5
34.6
2017E
27.0
30.8
-4.7
29.6
-7.1
-7.4
68.1
-26.8
0.0
0.0
-26.8
0.0
20.0
-29.6
-1.7
-6.7
34.7
34.6
69.2
4 November 2014
8

Jindal Steel & Power
NOTES
4 November 2014
9

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