MOSL: JINDAL STEEL AND POWER (Buy)-Despite sequential contraction, steel margins remain robust
Jindal Steel and Power: Despite sequential contraction, steel margins remain robust; Rates improved at Jindal Power; Reiterating Buy
(JSP IN, Mkt Cap USD2.4b, CMP INR182, TP INR336, 84% Upside, Buy)
- 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).
- Standalone – spreads compress: Steel sales increased 8% QoQ (+54% YoY) to 1.28mt. EBITDA per ton declined 18% QoQ to INR11,344 due to lower spreads. EBITDA was down 12% QoQ (+85% YoY) to INR14.5b (our estimate: INR13.2b).
- Oman – margins shrink: 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 INR3.2b.
- Jindal Power – rates improve: PLF declined ~4pp QoQ to 33% due to shortage of coal. Realization increased ~19% QoQ to INR4.08/kWh. EBITDA was INR3b.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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