Motilal Oswal is bullish on Jindal Steel and Power has recommended buy rating on the stock with a target price of Rs 336 in its research report dated November 13, 2018.
Motilal Oswal's research report on Jindal Steel and Power
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).
Outlook
The stock trades at attractive valuation of 6.1xFY20E EV/EBITDA. We value the stock at INR336 based on SOTP (Exhibit 15). We reiterate Buy.
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