Should you buy Jindal Steel and Power post 966% rise in Q1 net profit?
Shares of the company traded 4.33% higher at Rs 418.10 in the early trade on August 11, while the BSE Sensex was up 112 points, or 0.21%, at 54,666
Brokerages retained their bullish view on Jindal Steel and Power after the company on Tuesday reported over 10 times, or 966%, growth in consolidated net profit at Rs 2,516 crore for the quarter ended June 30. The company had posted a profit of Rs 236 crore in the same quarter last year. Its total income in April-June 2021 also jumped to Rs 10,643.17 crore, from Rs 6,519.27 crore in the year-ago period.
Shares of the company traded 4.33% higher at Rs 418.10 in the early trade on August 11, while the benchmark BSE Sensex was up 112 points, or 0.21%, at 54,666. Total expenses stood at Rs 7,233.55 crore, higher as compared with Rs 6,147.90 crore a year ago.
While retaining the ‘Buy’ call on JSPL, Citi said that Q1 realisation surprised positively. It further added that completion of JPL divestment should help in bringing more openness for strategic investors. The overseas financial firm reiterates ‘Buy’ due to China supply cuts and strong demand for steel from the rest of the world. Citi has set a target price of Rs 640 for JSPL, indicating an upside of 53% from the current market price.
JSPL in a statement said that during the June 2021 quarter, it produced 2.01 million tonne (MT) steel; higher from 1.67 MT in April-June of the preceding fiscal year. While the sales stood at 1.61 MT, compared with 1.56 MT a year ago.
“Continued cash generation, declining finance cost, lower capex (capital expenditure) and debt associated with JPL (Jindal Power Ltd) moving out of JSPL’s consolidated books have all contributed to continued deleveraging in 1QFY22. “Consolidated net debt has declined further to Rs 15,227 crore in 1QFY22 from Rs 22,146 crore in March 2021,” it said.
Domestic brokerage firm Motilal Oswal Financial Services sees over 40% upside in JSPL post Q1 result. It has fixed a target price of Rs 495 for the steel major. “JSPL’s Q1FY22 result was strong as expected, with the highest ever EBITDA/tonne of Rs 28,098 (7% above our estimate),” Motilal Oswal Financial Services said. It further added that margin for JSPL is expected to drop in the near term due to exhaustion of zero cost Sarda iron inventory (in April 2021) and higher coking coal prices, EBITDA/tonnes should remain healthy at around Rs 12,000/t in FY23E (against an average of Rs 9,500/t in FY16-20).
Edelweiss Securities is also positive on JSPL with a price target of Rs 460. “Despite, little underlying price support, the company has managed to increase its margin in Q1FY22. We believe that continuous debt reduction and coal security place JSPL in a very good position to boost its capacity without further leveraging,” the brokerage said.