Q3FY18 result highlights- in-line operational results
Jindal Steel and Power (JSPL) recorded in-line operational results with consolidated EBITDA of Rs16.1bn, up 17% qoq driven by improved profitability of its steel businesses at both India and Oman. EBITDA ex-JPL, stood at Rs12.5bn, up 22% qoq. Consolidated net loss reduced to Rs 2.7bn from loss of Rs 3.5bn in Q2FY18.
Key Positives: Higher steel and power volumes, improved steel spreads
Key Negatives: High operating expenditure, high coal cost
Valuation & view- Reiterate Outperformer with TP of Rs315
We expect JSPL to turnaround and report profits from Q4FY18 on account of incremental volume coming in from Angul plant and better spreads in steel business. With the company deleveraging from FY19E onwards, we estimate net debt/EBITDA will reduce from 10.4x in FY17 to 3.7x in FY20E. Our SoTP-based target price of Rs315 is derived from Rs218/sh valuation of the company’s steel business (6.5x FY20E EV/EBITDA) and from DCF-based value of Rs97/sh for the power subsidiary (JPL). Reiterate Outperformer.
Jindal Steel & Power is engaged in the manufacture of rails, parallel flange beams and columns, plates and coils, angles and columns, rebars, wire rods, fabricated secions, speedfloor, semi-finished products, power, minerals and sponge iron.
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