Jindal Steel soars 8% on healthy monthly sales, surges 58% in one month

Analysts at Edelweiss Securities expect JSPL to maintain an edge over peers.
Shares of Jindal Steel & Power moved higher by 8 per cent to Rs 138 on the BSE on Thursday in an otherwise subdued market after the company said it has recorded the highest ever standalone steel sales of 640,000 tonnes in May 2020, with the revival of domestic demand. The steel sales posted a remarkable growth of 28 per cent during the month as compared to 500,000 tonnes in the corresponding month of the previous year.

JSPL has recorded consolidated steel sales of 7.97 million tonnes which is a growth of 26 per cent as compared to a sales of 631,000 tonnes during the same period in the previous year. However, the company’s consolidated steel production fell 9 per cent year-on-year (YoY) at 620,000 tonnes in May 2020 against 681,000 tonnes in May 2019.

JSPL has outperformed the market by surging 58 per cent in the past one month, as compared to a 6.7 per cent rise in the S&P BSE Sensex. The stock was trading at its highest level since March 9, 2020.

For the January-March quarter (Q4FY20), JSPL reported a better-than-expected consolidated net profit at Rs 306 crore, against loss of Rs 219 crore in the year-ago quarter. EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin expanded 500 basis points to 25 per cent from 20.0 per cent in the previous year quarter.

Going ahead, analysts at Edelweiss Securities expect JSPL to maintain an edge over peers owing to low-cost iron ore from the Sarda mines; benefits of lower coal cost for the power division; and longs’ potentially better showing than flats. However, a delay in restructuring the Australian mining division remains a key risk.

“We reiterate JSPL holds good value as cost efficiencies and low capex intensity are expected to aid cash conservation in the ongoing difficult times. We will keep close tabs on the developments regarding the Australian subsidiary,” the brokerage firm said. However, the stock was trading above the 12-month target price of Rs 135 per share.

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