Jindal Stainless gains on better-than-expected Q1 numbers

The firm’s profit rose to Rs 737.6 crore in the June quarter from Rs 507.9 crore in the year-ago period on healthy domestic market growth and a 17 percent increase in exports

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Jindal Stainless Ltd shares were trading more than 2 percent higher on July 27, a day after the firm reported a 45 percent jump in its June quarter profit.

At 10.15 am, the stock was trading at Rs 385 on BSE, up 2.1 percent from the previous close, after touching a high of Rs 386.55 a share.

The firm’s profit rose to Rs 737.6 crore from Rs 507.9 crore in the year-ago period, way ahead of Rs 479.9 crore estimated by analysts tracked by Bloomberg.

The company’s revenue was up 25 percent at Rs 10,184, again exceeding Bloomberg’s estimate of Rs 9,457.8 crore. EBITDA, too, showed significant growth, rising 34 percent to Rs 1,192.4 crore from Rs 889.2 crore in the year-ago quarter. Bloomberg’s estimate for EBITDA was Rs 994.6 crore.

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The robust performance was fuelled by a combination of factors. The domestic market experienced healthy growth, aided by government initiatives to boost infrastructure projects. As a result, sales volume increased across different segments, with domestic revenue accounting for 83 percent of the company’s total.

The consumer segment witnessed a surge in pre-festive season demand, contributing to the rise in sales volume. The company’s exports grew by 17 percent, with a particular focus on the US and European markets.

“We are positive on JSTL’s strategy of focusing on volume-led growth over debt reduction as growth capex is likely to be funded through internal accruals. However, this makes the company more susceptible to the steel cycle and prices,” ICICI Securities said in a note.

“The stock is trading at 6.8x EBITDA (ex-Acceptances), 90th percentile of its past 10-year trading range. We value JSTL stock at 6.6x (earlier 6.3x), corresponding to 1 deviation (and 80th percentile) above past 10-year average.”

The high multiple captures adequately the benefit of future growth opportunities. Taking cognisance of Q1FY24 performance, ICICI Securities raised FY25E EBITDA by 5 percent, its analysts wrote in the note.

The company made a strategic move by completing the acquisition of Jindal United Steel Ltd. (JUSL), an associate company of the Jindal Stainless group.

JUSL operates a 1.6 million tonne hot strip mill and a 0.2 MT cold rolling mill. It is also undergoing an expansion of 3.2 MT in Jajpur, Odisha. This acquisition is expected to further enhance the company’s capabilities and market presence, it said.

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