Jindal Steel & Power - Initiating Coverage - Angel Broking

JSPL is part of OP Jindal Group with presence in steel, power and mining sectors. JSPL has capacity of 10.6 MTPA crude steel and 3,400MW of power generation capacity through its subsidiary Jindal Power Limited (JPL).

Capacity expansion done; EBIDTA/Tonne likely to improve: The company has increased its crude steel capacity more than double in last five years from 3.6 MTPA to 8.6 MTPA and currently running at ~50% utilization, However given the current market scenario of steel demand we expect utilization level to improve to 80-85% in next 7-8 months.

Further, Jindal Shadeed (OMAN subsidiary) with a crude steel capacity of 2MTPA has ram up significantly in last three years and running at ~ 80% utilization we expect the plant to reach to further utilization level of 85-90% going ahead. On account of this we expect a combined output of crude steel to reach to 8.5-9 MTPA by FY19.

Improvement in PLF and PPA going ahead: In FY18 JPL has signed a additional 250MW of PPA which makes it ~30% of installed capacity and it is in further discussions with various utilities for signing of another 300MW PPA. Management expects to generate ~1,700 MW units by FY19 owing to GOI's effort to improve coal availability with implementation of SHAKTI scheme.

Outlook & Valuation: JSPL is currently placed at an inflection point where it is witnessing positive changes like (a) end of capex cycle and equipped with fully operational Angul plant with 5 MTPA capacity, (b) increasing demand of power going forward with expectation of signing new PPA at JPL, (c) monetization of few assets like disinvestment of Tamnar - (EUP-I) 1,000 MW power plant and planning for IPO of OMAN plant. Considering the company's recent developments and favorable business environment, we believe JSPL is trading at attractive valuation to its peer, hence we recommend ACCUMULATE on the stock with Target Price of Rs. 327 based on asset based approach of Steel segment on EV/Tonne basis and Power segment on EV/MW basis.

Shares of JINDAL STEEL & POWER LTD. was last trading in BSE at Rs.215.55 as compared to the previous close of Rs. 212. The total number of shares traded during the day was 740771 in over 4168 trades.

The stock hit an intraday high of Rs. 221.5 and intraday low of 207. The net turnover during the day was Rs. 160435790.

Source : Equity Bulls

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