• Rajasthan

    Cong 100
    BJP 73
    RLM 3
    OTH 23
  • Madhya Pradesh

    Cong 115
    BJP 106
    BSP 2
    OTH 7
  • Chhattisgarh

    Cong 63
    BJP 18
    JCC 9
    OTH 0
  • Telangana

    TRS-AIMIM 94
    TDP-Cong 22
    BJP 1
    OTH 2
  • Mizoram

    MNF 26
    Cong 5
    BJP 1
    OTH 8

* Total Tally Reflects Leads + Wins

‘Buy’ on Jindal Steel and Power with TP of Rs 244

By: | Published: December 7, 2018 2:25 AM

EBITDA at `21 bn, up 53% YoY, exceeded our/consensus estimate of `19 bn mainly due to (1) better-than-expected profitability of power business and (2) Mozambique EBITDA contribution at $5.7 m vs. expectation of minimum profitability.

Accordingly, EBITDA/t declined by Rs 3,400/t to Rs 9,200 vs. Rs 12,600 in Q1 and Rs 7,600 in Q2FY18.

EBITDA at `21 bn, up 53% YoY, exceeded our/consensus estimate of `19 bn mainly due to (1) better-than-expected profitability of power business and (2) Mozambique EBITDA contribution at $5.7 m vs. expectation of minimum profitability.

Ramp-up of Angul plant continued although Q2 is a seasonally weak quarter for long products. Q2FY19 steel sales were at 1.28 MT vs. 1.18/0.83 MT in Q1FY19/Q2FY18. Angul plant’s blast furnace current production run-rate is 9,000 tpd. However, in view of slower-than-expected ramp-up, the management has lowered FY19 India steel volume guidance from 7 MT to 5.8-6 MT. We accordingly reduce our India steel estimates for FY19/20/21 to 5.8/7.2/8 MT vs. 6/7.5/8.8 MT earlier.
Average realisation for India steel declined by `3,900/tonne, in line with expectation, as long prices are weak during monsoon. Accordingly, EBITDA/t declined by `3,400/t to `9,200 vs. `12,600 in Q1 and `7,600 in Q2FY18.

Power prices surged in Q2 as industry-wide supply reduced on shortage of coal. Power price in the spot market also surged with JSPL clocking `5.7/unit revenue during the quarter (currently cooled to `3.9/unit). JPL reported EBITDA of `3 bn (vs. `3.1 bn in Q1FY19) on higher coal cost and higher share of PPAs (90%). Units sold in Q2 were 2,427 (flat YoY). We revise our FY19/20/21 EPS estimate to `5/17/27 from `7/19/32 earlier on slower-than-expected ramp-up of Angul plant. SoTP-based TP revised to `244 (implies 39% upside) vs. `262 earlier; Maintain BUY.
Production volume dipped 20% due to maintenance and shutdown in wake of capacity enhancement. JSPL’s EBITDA was at $46 m, down 16% YoY, due to shutdown of plant and narrowing spread in the region led by Turkey. Company mentioned it has recently obtained permission from the Oman government for additional gas to increase its DRI capacity. Hence, it is increasing its Oman capacity from 185t/hr to 225t/hr. Due to this, the plant was shut for 35 days.Produced 0.5 MT ROM and continues to ramp up. Q2 EBITDA was $5.7 m vs. negligible EBITDA in previous quarters.

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