MOSL: JINDAL STEEL AND POWER (Buy)-Subsidiary performance and exceptions drag 4Q
Jindal Steel and Power: Subsidiary performance and exceptions drag 4Q; Steel business ramping up, power outlook improving; Reiterate Buy
(JSP IN, Mkt Cap USD2.1b, CMP INR152, TP INR217, 43% Upside, 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 dispute (INR3.1b), and (3) PGP plant at Barbil (INR0.7b). We, however, note that these charges are pertaining to previous years and are non-cash in nature. JSP has also impaired INR12.9b of assets given the Wongawalli mine shutdown.
- Standalone steel sales rose 24% QoQ (+20% YoY) to 1.51mt, but EBITDA/t declined 20% QoQ to INR9,931 due to lower spreads.
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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