JSPL - Capacity, Cost-Efficiencies To Aid Earnings: ICICI Securities

ICICI Securities Report

Jindal Steel and Power Ltd. has been the top performer among mainstream ferrous players with a robust return of 45% in past three months. However, we envisage further upside in the stock driven by:

1. cost-efficiencies as captive thermal coal mines ramp up;

2. logistical advantages from new conveyor belt and slurry pipeline;

3. upcoming capacity expansion of 6 million tonnes per annum at Angul expected to result in a volume compound annual growth rate of 11% through to FY25E; and

4. acquisition of Monnet Power Company’s assets, which is likely to reduce costs further.

Despite our estimate of progressively declining realisations, we expect cost-efficiencies to lift standalone Ebitda/tonne to Rs 14,500 by FY25E.

In view of our revised cost estimates, we raise our FY24E Ebitda by 24%. Besides, a combination of directly reduced iron and blast furnace-based iron making at Angul gives JSPL operating flexibility and an opportunity to optimise costs.

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