PL First Cut – Jindal Stainless 2QFY24

PL First Cut – Jindal Stainless 2QFY24 – Tushar Chaudhari – Research Analyst, Prabhudas Lilladher Pvt Ltd

Jindal Stainless (JDSL IN, CMP Rs 448, Mcap Rs 369 bn, Buy) 2QFY24 Results: In-line; Strong operating performance led by 25% YoY volume growth; realization is under pressure

✳️ JDSL’s standalone merged revenue increased 13.6% YoY (-3.1% QoQ) to Rs 97.2 bn on weak realizations. Average realization declined 9.5% YoY to Rs179k/t (-2.2% QoQ) affected by pricing pressure and higher imports. Stainless steel volumes grew strong 25.5% YoY to 543.6kt (-0.9% QoQ). Demand from domestic end user industries remained robust led by Auto and consumer facing segments.

✳️ EBITDA grew robust 54% YoY to Rs 10.7 bn (in-line with PLe of Rs 10.8 bn; -4.3% QoQ). EBITDA/t increased 22.6% YoY at Rs19,679 (-3.4% QoQ) which is within company guidance range of Rs19-21k.

✳️ COGS and other expenses both inched up 11% YoY. PAT grew strong 75% YoY Rs 6.1 bn (-8.5% QoQ).

✳️ Cons. EBITDA grew 80% YoY to Rs 12.3 bn largely in-line with PLe of Rs 12.4 bn.

✳️ Cons. reported PAT grew 115% YoY to Rs 7.6 bn (PLe of Rs 7.3 bn) which included exceptional income of Rs 1 bn on account of re-measurement of its previously held 26% equity stake of JUSL.

✳️ Cons. net debt declined to Rs26.2bn as of 30th Sept’23 Vs Rs 37.13bn on 30th June’ 23.

✳️ PL View: JDSL’s 2QFY24 operating performance was in-line with PLe led by robust volume growth despite weakness in stainless steel prices. Going ahead with stronger 2HFY24, 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 (wagons, metro coaches, bridges), infrastructure (lifts & elevators) and process industries apart from Automobiles & cookware. JDSL has demonstrated its pricing power in the past however falling RM prices and rising imports can put pressure on realizations. Stock is trading at 6.1x EV of FY25E EBITDA. Maintain BUY with TP of Rs 484.