Strong FCF generation drive fall in Net debt by 11%/Rs33bn QoQ at Rs256bn Jindal steel & Power's (JSP) Q3FY21 EBITDA beat our/consensus estimates by 5%/25% on the back of strong margins. We expect margins to further improve by Rs2,500/t QoQ, led by higher prices and stable costs. JSP reduced net debt by 33%/Rs151bn over last five years through organic route. Trajectory would sustain at Rs30bn/year for next couple of years on...

JPL the highest bidder in Gare Palma IV/1 coal block auction Jindal Power Limited (JPL), subsidiary of Jindal Steel and Power (JSP), emerged as the highest bidder in the auction of the 6mtpa Gare Palma IV/1 coal block at 25% of the coal price based on the National Coal Index. We estimate average savings of ~INR750/t JSP IN on 6mt coal, implying savings of INR4.5b/year. Assigning a 5x EBITDA multiple could...

23 July 2020 Jindal Steel and Power (JSP)s 1QFY21 result highlights the benefit of cost reduction in its steel operations. EBITDA was up We raise JSPs FY21/FY22 EBITDA estimates by 6%/5% to factor cost reduction demonstrated by the company. We expect JSP to reduce its net debt by INR83b (INR81/sh) to INR296b over FY2022E. The Oman divestment would reduce debt by an additional ~INR60b. of insurance claim higher volumes and cost reduction in standalone operations. The beat on estimates was led by lower-than-expected costs in standalone operations. Adj. PAT stood at INR1.0b (v/s est.

Jindal steel & Power's (JSP) Q1FY21 adj. EBITDA came ahead of our/consensus estimates by 12%/22% at Rs22.6b, led by domestic steel and Jindal power (JPL). EBITDA of Domestic steel/JPL rose 9%/11% QoQ (+6%/+2%YoY). Aided by better operating performance and lower interest cost, cash profit rose 2% QoQ/19% YoY at Rs12.6bn (PLe:10.0bn). JSP reduced net debt by 25%/Rs115bn over last four years. Trajectory would...

estimates by 11%/9% at Rs22.2b, led by higher margins in India and Shadeed steel operations. EBITDA of Domestic steel/Shadeed/Jindal power (JPL) rose 16%/93%/30% QoQ (+8%/+82%/25% YoY). Aided by lower interest cost, quarter turned black with PBT (before exceptional) of Rs1.9bn (PLe:loss of Rs1.5bn) against loss of Rs2.0bn/Rs4.0bn in Q3FY20/Q4FY19....

JSPL produced 550kt steel and related products during Apr20 (up 5% YoY). This was on the back of record high production from the Angul Blast Furnace, which produced 298kt hot metal, clocking 10kt daily. Though domestic demand remained dry during the month, production was boosted by large export orders, primarily of billets from China due to the shortage Apr20 sales stood at 335kt, of which 248kt (74% of total) were exports. The balance production in Apr20 is at the ports, waiting to be exported out; sales We note that while these export volumes would earn lower EBITDA margins (likely ~INR5,000/t), it is still positive as this should help recover fixed costs if plants earn positive cash flows, which is critical in this environment. JSPLs Oman operations reported production of 106kt, down ~40% over the normal monthly run-rate. However, the decline in sales volumes was lower at 33%.

Jindal Steel and Power Ltd. (JSPL), a part of the USD 22 billion diversified O. P. Jindal Group with the youngest son Mr. Naveen Jindal as a chairperson who transformed a moderately performing company into a world class organization. JSPL, established in the year 1952 is an industrial powerhouse and one of India's fastest growing and largest integrated steel manufacturers with a dominant presence in steel, power, mining and infrastructure sectors. The company operates some of India's most advanced steel manufacturing and power generation capacities of global scale through backward and forward integration spanning across the states of Chhattisgarh,...

JSP reduced debt by ~23% over last four years on the back of improved earnings, strong control on working capital and lean capex. It would continue to reduce debt by 10% for next couple of years as company remains focused on reviving its idle capacity and optimization of capex and working capital. We remain positive on JSP given the strong scope for increase in utilisation of idle steel and power capacity in India, lean capex and continuous reduction...

20 January 2020 JSPs result instills more confidence in the expected steel volume ramp-up with strong 34% YoY standalone volume growth to 1.6mt (+21% QoQ) in 3QFY20. Moreover, the sharp improvement in steel prices over the past two months, coupled with lower coking coal cost, has reinforced the near-term margins outlook. We estimate EBITDA/ton to improve ~30% QoQ to INR11,000/t in 4QFY20. Reiterating with an SOTP-based target price of INR210. EBITDA of INR18.1b (+11% QoQ) in 3QFY20 was 5% above our estimate due to higher volumes in the standalone business. Interest cost declined 3% QoQ to INR10b. Steel sales volumes were strong at 1.6mt (+21% QoQ, +34% YoY). Implied steel realization dropped to INR39,023/t (-16% QoQ), resulting in an EBITDA margin of ~INR8,400/t (-32% YoY, 11% QoQ) weakest in three years. EBITDA stood at INR13.5b (+8% QoQ, -9% YoY due to lower realizations), above our estimate of INR12.

20 December 2019 With restarting of the cost-efficient DRI plant (using coke oven gas), total metallic availability would increase to ~13,000tpd from Jan20 (from 10,000tpd currently), implying that annual steel production of ~4mnt would be achievable at Angul at a competitive cost. We, therefore, increase our FY21 standalone steel sales volume estimate to 6.2mnt, implying a 10% CAGR in FY19-21E. Lower raw material cost led by decline in coking coal and iron ore costs should partially offset the decline in steel prices seen in the past six months. JSP's power business remains highly underutilized with PLF hovering around 35%. JSP is well placed to secure PPAs as this plays out, which should boost its free cash flows. We expect JSP to generate significant consolidated free cash flow (as major capital expenditure is now behind), which will help reduce leverage INR365b net debt as of Sep19 with ~5x net debt/ EBITDA.

3 December 2019 The Supreme Court (SC) has deferred its verdict on JSPs case related to the offtake of iron ore from the Sarda mines. JSP though had made payment for ~12mt of iron ore (mainly fines) to Sarda and the state (royalty/taxes), thereby stating its claim on the related ore. JSP cited it sources iron ore fines at INR1,800-2,000/t (ex-mine). Thus, if the company were allowed to lift the 12mt of fines, it will lead to a benefit of INR22- 24b. Thus, availability of this 12mt would provide significant cushion against any possible disruption (accounting for 18-20 months of sourcing from merchant mines). In recent times, JSPLs stock has re-rated (up ~55% over the past two months) on expectations of (a) benefit of coal block allocation (Gare Palma), (b) possible positive verdict on the Sarda mines case and (c) a recovery in steel prices.

2014, the block was owned and operated by JSP to meet coal requirement of its sponge iron ore and CPP at Raigarh plant. Benefitted by proximity of mine to its plant and owned infrastructure, JSP was best placed to win the auction. We see the bid as a significant positive development for JSP as this would lower its coal cost by Rs1,300/t (for 6mtpa of coal) along with much needed raw material security in wake of severe shortage of domestic coal. We expect coal block to add Rs46bn (Rs46/share) to the equity value based on...

Net debt fell 8% YoY in FY19: Led by strong operating cash flow (OCF) dues, net debt fell to Rs391bn. Statutory dues (on days basis to sales) reached to 25 days which as significantly higher, compared to its peers. Net debt has fallen by ~15% from peak level of Rs460bn in FY16. Led by stable earnings and lean...

Company continued to deliver strongly on debt. Net debt fell 4% QoQ/Rs14bn to Rs376bn due to higher FCF generation and proceeds of Rs5bn from conversion of options to shares by promoters. Management expects to maintain Q1 EBITDA margins in domestic steel operations due to lower fall in realisations (due to its better mix inclined towards Rails, structural and beams) than market, offset by reduction in iron ore and coal cost. Street remains doubtful on JSP's ability to generate ample FCF to meet its...

17%/Rs1,600/t QoQ (down 23%/Rs2,860/t) to Rs9,590 (PLe: Rs9,845), due to weaker than expected realisations. Angul (BF +BoF) steel operations stabilized in Q4FY19 with 88-90% utilisation levels. Given the weak operating performance and fall in realisations, we cut our EBITDA estimates by 0.9% for FY21E. We downgrade our rating to...

Steel business ramping up, power outlook improving; Reiterate Buy 4QFY19 consolidated EBITDA at INR18.5b (-11% QoQ) came in 12% below our estimate due to (1) higher coal costs for Jindal Power, (2) low margins at Oman Steel, and (3) shutdown at Wongawalli mine. Interest cost increased 11% QoQ to INR11.6b on rising interest rates and LC discounting. Cash PAT (pre-tax and MI) declined 35% QoQ to INR6.8b (v/s. our estimate of INR10.6b). Non-cash exceptions drag reported performance: JSP incurred write-offs of INR17.3b related to (1) additional coal penalty (INR13.5b), (2) electricity duty...

For running the DRI plant at full capacity, production at 5-6 units of CGP will have to be ramped up. In contrast, if coal were made available from its erstwhile captive mine (de- allocated in 2014), the receiving time (post production) would be ~12 hours and cost of gas production would have been USD3-4/mmbtu. DRI plant has restarted in Mar19 and is operating at a run-rate of ~1mtpa (3,000tpd at 50% utilization). JSP plans to increase the DRI utilization run-rate to ~80-85% by Sep19. JSP has started using surplus coke oven gases (two coke oven batteries commissioned last year) in DRI production. The third coke oven battery is likely to be commissioned in FY20. Usage of coke oven gases in DRI production is likely to increase. Coke oven acts as a cost-effective substitute to syngas (gas obtained from CGP).

2 February 2019 JSPs 3QFY19 consolidated EBITDA declined 6% QoQ (+29% YoY) to INR20.1b led by a 6% decline in steel volumes in India and margin compression in Oman Steel & Jindal Power (JPL). But, the same was partly offset by improved margins in India. Interest cost declined 4% QoQ to INR10.4b, while Adj. PAT turned marginally negative at INR258m. Steel sales declined 6% QoQ (+26% YoY) to 1.2mt as prices were volatile in Dec19; due to the mix, average steel prices were higher. EBITDA per ton increased 9% QoQ to INR12,344 on higher spreads, despite steel prices weakening. EBITDA increased 2% QoQ (+61% YoY) to INR14.8b. Steel sales declined 4% QoQ to 450ktm, while production recovered to 460kt (+21% QoQ, +10% YoY), after maintenance shutdown. EBITDA per ton slid again by 27% to USD71/t on volatility in steel prices. EBITDA declined 32% QoQ to INR2.2b.

Outlook & Valuation: We have positive view on steel and power sectors on long term basis and expect JSPL to perform well in coming years owing to ramp up of Angul plant and realization in steel segment. We also expect power segment to perform well on account of improving power demand situation and various effort by GoI for availabilit..

13 November 2018 2QFY19 consolidated EBITDA declined 3% QoQ (+61% YoY) to INR22b (15% beat), led by compression in steel margins, both in India and Oman. The impact, however, was offset by improved profitability at overseas mines (e.g. Mozambique) and reversal of INR1b provision at Australia. Interest cost increased 12% QoQ to INR10.8b. Adj. PAT declined 51% QoQ to INR882m (v/s our estimate of a loss of INR2.3b). Steel sales increased 8% QoQ (+54% YoY) to 1.28mt. EBITDA per ton declined 18% QoQ to INR11,344 due to lower spreads. Steel sales increased 7% YoY to 470ktm, while production was lower at 380kt due to maintenance shutdown. EBITDA per ton was down 33% to USD98/t. EBITDA declined 29% QoQ to INR3.