Prabhudas Lilladher is bullish on Jindal Steel and Power has recommended buy rating on the stock with a target price of Rs 150 in its research report dated May 26, 2020.
Prabhudas Lilladher's research report on Jindal Steel and Power
Jindal steel & Power’s (JSP) Q4FY20 EBITDA came ahead of our/consensus estimates by 11%/9% at Rs22.2b, led by higher margins in India and Shadeed steel operations. EBITDA of Domestic steel/Shadeed/Jindal power (JPL) rose 16%/93%/30% QoQ (+8%/+82%/25% YoY). Aided by lower interest cost, quarter turned black with PBT (before exceptional) of Rs1.9bn (PLe:loss of Rs1.5bn) against loss of Rs2.0bn/Rs4.0bn in Q3FY20/Q4FY19. Net debt rose marginally 1.3%/Rs4.6bn QoQ (↓8% YoY/Rs31.7bn) to Rs359.2bn due to adverse FX translation of Rs7.4bn. It would continue to reduce debt by Rs25-30bn on the back of higher utilisations, lean capex and lower iron ore cost with the availability of inventory lying at Sarda mines. Our debt reduction estimates do not factor saving from restructuring of debt in Australian operations and realisation of dues from SEBs. In spite of weak domestic demand, JSP maintained its volumes at last year levels in April and May on the back of strong push in exports.
Outlook
Lower realisations in exports would be offset by lower iron ore and coking coal cost. Driven by steady reduction in debt and stable operations, we reiterate BUY with TP of Rs150.
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