Jindal Steel & Power: CMP: INR357 Management Meeting Update
Jindal Steel & Power: CMP: INR357 Management Meeting Update
Jindal Steel & Power: CMP: INR357 Management Meeting Update
Financials Snapshot (INR b) Pricing remains under pressure in the near term; 4Q outlook positive
Y/E Mar 2021 2022E 2023E The management highlighted that the pricing for longs products has
Net Sales 388.6 478.8 455.5 corrected by INR4000/t. Rebar has corrected to INR58,000/t (from
EBITDA 147.6 152.4 103.2
INR62,000/t in Nov). We believe the trade is operating at INR56,000/t.
PAT 62.7 80.7 49.6
EPS (INR) 61.4 79.0 48.5 Flats are currently being exported at ~USD815/t CFR, while China is offering
Gr. (%) -1,307.0 28.6 -38.6 USD780/t. On the other hand, domestic prices stand at USD902/t. The
BV/Sh (INR) 311.9 391.0 439.6 management expects a price reduction for flats in the domestic market, in
RoE (%) 19.6 22.5 11.7 line with the reduction in longs.
RoCE (%) 16.7 19.4 12.0
We expect a price recovery in 4Q as pent-up demand and unfinished projects
P/E (x) 5.8 4.5 7.3
are revived.
P/BV (x) 1.1 0.9 0.8
However, the resurgence of COVID remains a key concern, with fears related
Shareholding pattern (%) to the Omicron variant leading to the postponement of consumption.
As On Sep-21 Jun-21 Sep-20
Promoter 60.5 60.5 60.5
Expansion program on track
DII 15.7 15.2 13.7
FII 9.9 10.5 12.2
The company has placed orders for equipment, indicating, with reasonable
Others 13.9 13.8 13.6 certainty, that projects would get commissioned on time, subject to COVID-
FII Includes depository receipts related disruptions.
A 6mt pellet plant would be the first one to be commissioned by Sep’22. This
Stock Performance (1-year) would augment operational cash flows as the rest of the plant moves to the
construction phase.
Jindal Steel
Steel volumes would grow beyond the current 1mt (increase in CTO) from
Sensex - Rebased
520 FY24E/FY25E depending on the construction timelines.
A large portion of the equipment being sourced this time around has been
440
finalized on INR terms v/s prior expansions, where a large portion of the
360
capex was spent on the USD denomination. The management believes this
280
would reduce its dollar exposure for capex funding.
200
Apr-21
Jun-21
Dec-20
Feb-21
Aug-21
Dec-21
Oct-21
Subsequently, it would set up a 2x 6mt pellet plant at Angul, which would be fed
with iron ore brought to Angul through a slurry pipeline from the Kasia mines;
this could be expanded to match the Angul pellet plant requirement.
It also has a 5mt sinter at Angul and a ~2.8mt sinter at Raipur. These would
continue to be used, thereby leaving a surplus of 6–7mt pellets for sale in the
merchant market.
The Wollongong coking coal mines in Australia would supply ~1mt going
forward once the mine is fully operational.
Mozambique would deliver another 1mt, while Anthracite coal from SA would
be a natural hedge.
This would bring the captive coking coal source to 2.5mt. Its peak requirement
for coking coal for 7mt hot metal would be 5.5–6mt, of which 2.5–3mt would be
captive from Australia, Mozambique, and South Africa. The balance premium
hard coking coal would continue to be imported.
Net debt to continue to taper, with FY23 net debt zero target in place
The company is maintaining its target to turn net debt zero by end-FY23.
However, JSPL may achieve this earlier as it is planning another stream of cash
flows from the 6mt pellet plant being set up in Angul by Sep’22.
Assuming a conservative margin of ~INR1000/t on pellet sales, the company
could ideally secure additional cash flows of INR20b to achieve debt reduction –
provided the pellet plant is commercially commissioned by Sep’22.
The company reported consolidated net debt of INR112b at end-2QFY22.
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Jindal Steel & Power
Key charts
Exhibit 1: Rising volumes driven by organic expansion Exhibit 2: Normalized EBITDA margin assumed for FY23…
S/A EBITDA/t (INR/t)
Sales (mt)
19,293
8.3 17,769
7.3 7.7
6.0 12,155
5.4 10,567 11,122 9,565
3.8 8,620
2.9 3.4 3.4 7,281
2.8 2.9
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22EFY23E FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E
149 6.8
129 4.9 4.6 1.5 0.6
101 0.3
60 58
45 37 37 40
464
461
438
411
359
221
29
26
90
24
FY23E
FY16
FY17
FY18
FY19
FY20
FY21
FY22E
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22EFY23E
Source: MOFSL, Company Source: MOFSL, Company
Exhibit 5: Economies of scale at Angul to drive down costs Exhibit 6: Our EBITDA assumptions remain conservative
Labour ($/t) P&F ($/t) Others ($/t) EBITDA ($/t) RM ($/t) Net realization ($/t)
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22E
FY23E
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Jindal Steel & Power
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Jindal Steel & Power
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