Motilal Oswal's research report on Jindal Steel and Power
JSP's 1QFY22 result was strong as expected, with the highest ever EBITDA/t of INR28,098/t (7% above our estimate). However, standalone EBITDA fell 7% QoQ to INR45.3b due to a 16% QoQ decline in volume. Adjusted for the JPL divestment, net debt fell only 4% QoQ to INR152b due to an increase in working capital. We raise our FY22E EBITDA by 13% on expectations of higher steel prices in the fiscal. Strong cash flows, coupled with cash proceeds of INR30.1b from the JPL divestment, should lead to a fall in net debt to INR34.5b by FY23E, implying 0.3x FY23E EBITDA. We reiterate our Buy rating.
Outlook
Our TP of INR495/share is based on 5x FY23E EV/EBITDA. At the CMP, the stock trades at an attractive 4.5x FY23E EV/EBITDA.
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