Jindal Steel & Power
BSE SENSEX
32,014
S&P CNX
9,979
8 August 2017
1QFY18 Results Update | Sector: Metals
CMP: INR140
TP: INR194(+39%)
Buy
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In-line; JPL delivers strong operating performance
Steel margins are inching up
Jindal Steel and Power’s (JSP) 1QFY18 consolidated EBITDA grew 37% YoY (-13%
QoQ) to INR13.5b (in-line). Interest cost rose 4% QoQ to INR9b due to an
increase in Libor. Cash profit was INR5.4b (v/s cash loss of INR3.2b in 1QFY17).
Net debt was unchanged QoQ, despite an increase in working capital.
Standalone (S/A) margins were stable:
EBITDA grew 14% YoY to INR7.5b, a
miss of 6% due to volumes. Sales grew 4% YoY to 810kt (est. of ~860kt).
There was an increase in inventory due to GST implementation. Pellet sales
declined 21% QoQ to 610kt, as exports were hurt by weak prices. EBITDA
per ton declined INR676 QoQ to INR9253, on expected line.
Jindal Power delivered strong operating performance:
EBITDA rose 23%
QoQ (157% YoY) to INR4.7b on 11pp QoQ increase in PLF to 43%. JPL
benefited from seasonally strong demand in the merchant market.
Global ventures (GV):
Oman continues to deliver strong EBITDA, which was
unchanged QoQ at USD32m. EBITDA from other GVs turned negative
because Wollongong mining was shut on contractor insolvency.
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
JSP IN
915
127.8 / 2.0
159 / 63
4/39/52
1360
38.1
Financials & Valuations (INR b)
2017 2018E
Y/E Mar
216.2
257.3
Net Sales
46.6
60.6
EBITDA
-19.1
-14.5
PAT
-20.9
-15.8
EPS (INR)
14.8
-24.2
Gr. (%)
328.5
312.3
BV/Sh (INR)
-7.9
-4.9
RoE (%)
1.0
2.0
RoCE (%)
-6.7
-8.8
P/E (x)
0.4
0.4
P/BV (x)
2019E
312.9
79.1
1.8
2.0
-112.7
313.9
0.6
4.0
69.4
0.4
Angul expansion to drive strong earnings growth; Maintain Buy
Estimate change
TP change
Rating change
Y/E March
Net Sales
Change (YoY %)
Total Expenditure
EBITDA
Interest
Depreciation
Other Income
PBT (before EO item)
Extra-ordinary Income
PBT (after EO item)
Total Tax
% Tax
Reported PAT
MI - Loss/(Profit)
Associate
Adjusted PAT
Change (YoY %)
1Q
46,962
-1.2
37,121
9,841
8,529
9,171
312
-7,548
-6,257
-13,805
-1,410
10.2
-12,395
-1,560
14
-4,564
34.5
The new blast furnace commissioned on 27 May is likely to record volume
growth in subsequent quarters. After commissioning of BOF later in the
year, we expect JSP to derive full benefit from the expansion. Over FY17-19,
we expect S/A steel volume CAGR of 32% to 5.8mt, and consolidated EBITDA
CAGR of 30% to INR79b.
JSP is likely to benefit from an improvement in the underlying drivers (higher
coking coal prices, domestic coal supply, pellet export prices, and domestic
long product prices) of earnings growth. Maintain
Buy.
FY18
2QE
3QE
57,782 66,882
18.9
19.8
43,909 50,817
13,874 16,066
7,698
7,622
11,173 11,873
1
1
-4,996 -3,428
0
0
-4,996 -3,428
16
17
-0.3
-0.5
-5,012 -3,445
-23
-23
100
100
-4,889 -3,322
-34.5
-18.5
FY17
4QE
73,271
13.0
56,153
17,118
7,700
11,935
1
-2,516
0
-2,516
18
-0.7
-2,534
-23
100
-2,411
-20.4
216,243
11.1
169,631
46,613
34,240
39,490
411
-26,706
-3,723
-30,429
-5,027
16.5
-25,402
-2,524
27
-19,128
14.8
FY18E
257,300
19.0
196,715
60,584
32,026
44,603
4
-16,041
0
-16,041
-836
5.2
-15,205
-402
310
-14,493
-24.2
vs Est
1QE
(%)
56,759
5
20.9
43,176
6
13,582
0
7,670
17
11,117
-13
1
-5,204
-2
0
-5,204
-2
15
-0.3
-5,219
-19
-23
100
-5,096
-24
11.6
Quarterly Performance (Consolidated) – INR million
FY17
2Q
3Q
48,609 55,812
-3.6
21.5
40,125 43,045
8,484 12,767
8,716 8,353
9,986 10,274
7
3
-10,211 -5,856
0
0
-10,211 -5,856
-2,739 -1,306
26.8
22.3
-7,473 -4,551
-2
-458
11
18
-7,460 -4,074
317.8
-38.7
4Q
64,861
27.7
49,340
15,521
8,642
10,059
90
-3,090
2,534
-556
428
-76.9
-984
-505
-16
-3,029
-37.4
1Q
59,364
26.4
45,837
13,527
9,006
9,622
0
-5,101
0
-5,101
-887
17.4
-4,214
-334
10
-3,871
-15.2
Sanjay Jain – Research Analyst
(SanjayJain@MotilalOswal.com); +91 22 6129 1523
Dhruv Muchhal – Research Analyst
(Dhruv.Muchhal@MotilalOswal.com); +91 22 6129 1549
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.