PL First Cut – Jindal Stainless 3QFY24 Results: EBITDA better than est. led by stronger JUSL; SS pricing under pressure; volumes affected by shutdown

PL First Cut – Tushar Chaudhari – Research Analyst, Prabhudas Lilladher Pvt Ltd

Jindal Stainless (JDSL IN, CMP Rs 584, Mcap Rs 473 bn, Accumulate) 3QFY24 Results: EBITDA better than est. led by stronger JUSL; SS pricing under pressure; volumes affected by shutdown

☘️ JDSL’s standalone merged revenue grew just 1% YoY (-6.5% QoQ; PLe Rs 94bn) to Rs 90.9 bn on weak realizations and lower volumes. Average realization declined 8.5% YoY to Rs176k/t (-1.6% QoQ) affected by weak stainless steel prices amidst higher imports. Stainless steel volumes grew 9.4% YoY to 512kt (-5.8% QoQ) as there was 15 days maintenance shutdown undertaken in CR mills for technology upgradation. Demand from most of the domestic end user industries remained strong despite some weakness in Auto segment.

☘️ EBITDA grew 8% YoY to Rs 10.2 bn (in-line with PLe of Rs 10.1 bn; -4.6% QoQ). EBITDA/t declined 1.5% YoY at Rs19,937 (up 1.3% QoQ; PLe Rs 19,637/t) which is within company guidance range of Rs19-21k.

☘️ Export demand was weaker this quarter with export share at 12% vs 13% in 2QFY24.

☘️ COGS remained flat YoY due to increase in inventories to the tune of Rs5.6bn. PAT grew strong 41% YoY Rs 7.8 bn (+28% QoQ) due to higher other income which includes interim dividend of Rs2 bn from JUSL.

☘️ Net debt increased to Rs30.9bn as of 30th Dec’23 Vs Rs 26.2 bn as on 30th Sept’ 23.

☘️ Cons. EBITDA grew 44% YoY to Rs 12.5 bn better than PLe of Rs 11.5 bn due to stronger JUSL performance.

☘️ Cons. reported PAT grew 39% YoY to Rs 6.9 bn (PLe of Rs 7 bn).

☘️ PL View: JDSL’s 3QFY24 consolidated operating performance was better than PLe led by better JUSL performance. Standalone performance was in-line with our estimates despite weakness in stainless steel prices. Going ahead with demand remaining strong, we expect strong volume momentum to continue as company has adequate capacity. Domestic market is offering JDSL strong demand from new user industries such as railways, infrastructure and process industries apart from Automobiles & cookware. JDSL has demonstrated its pricing power in the rising RM scenario in the past however with RM prices falling sharply, stainless steel pricing is also under pressure in near term. Will await clarity on EBITDA/t guidance in results concall. Stock is trading at 7.9x and 6.5x EV of FY25E & FY26E EBITDA respectively. Maintain Accumulate with TP of Rs 583 based on 6.5x EV of FY26E EBITDA.