MOSL: Morning India (7/December/21): 1. Jindal Steel & Power (Management meeting update); 2. Biocon (On course to revive earnings growth)
MOrning India (7/December/21): 1. Jindal Steel & Power (Management meeting update); 2. Biocon (On course to revive earnings growth)
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Jindal Steel & Power: Management meeting update
- Near-term demand is tepid and demand decline is seen (especially last month) However, pent-up demand is inevitable, as seen since the ebbing of the first COVID wave.
- JSPL is undergoing a structural change in its EBITDA margin. We believe its sustainable EBITDA margin would likely improve by INR2,000-2,500/t over the previous cycle average driven by -
- Supply of pellets through the slurry pipeline - savings of INR600/t of iron ore
- Merchant sales of pellets of 6-7mt annually - margins of INR1,000-1,200/t of pellet
- An improvement in the FG mix with flats accounting for 67% of capacity post expansion (vs 28% now) and a significant reduction in semis from 35% to 5%
- Over the near term, the Steel market remains weak due to the factors discussed above. However, considering a) the long-term growth plan already under implementation (funded largely through internal accruals), b) the target to turn net debt zero by Mar'23 at the latest, and c) the mix towards flats improving the blended NSR substantially, we are positive on the stock and maintain a BUY rating with TP of Rs 478 based on 5x Mar-23E EV/EBITDA
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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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