Buy Jindal Steel; target of Rs 1245: Prabhudas Lilladher

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Capacity ramp-up: Jindal Steel's Angul blast furnace output has reached ~10,000t/day, with a target of 12,000t/day by Dec'26, supporting sustained EBITDA growth.
  • Improving operating leverage: The company aims to increase its value-added steel (VASP) share, reduce costs through captive raw materials and coal gas substitution, and improve capacity utilization.
  • Cost savings: The 192km Barbil-Angul slurry pipeline is expected to commence commercial operations shortly, saving ~INR700/t in freight and replacing ~500 trucks daily.
  • Better realizations: TMT prices have risen from ~INR52,000/t to INR59,000-60,000/t, while HRC prices increased from INR51,000-53,000/t to ~INR60,000/t, supporting better realizations.

Thesis Validation Checklist

  • Volume growth: Sales volumes are expected to grow, driven by the ramp-up of Angul and resilient domestic demand.
  • Margin expansion: Adjusted EBITDA/t is expected to improve, driven by higher volumes, better realizations, and cost-saving initiatives.
  • Debt reduction: Net debt/EBITDA is expected to remain below 1.5x, with the company aiming to keep debt under control through internal accruals.
  • Coking coal costs: Management expects coking coal costs to ease by Dec'26, which would support margin expansion.