Jindal Steel & Power up 2%, hits over 10-month high in a choppy market

Monnet Power Assets, once operational, will provide an opportunity for the company to improve the heat rate, resulting in lower usage of coal in the power plant, said ICICI Securities in its report.

Shares of Jindal Steel & Power (JSPL) hit an over 10-year high of Rs 610.25, up 2 per cent on the BSE in Wednesday’s intra-day trade in an otherwise choppy market on improved outlook. The stock traded at its highest level since March 2012. In comparison, the S&P BSE Sensex was up 0.10 per cent at 60,176 at 09:38 AM.

In past six months, the market price of JSPL has zoomed 74 per cent, as against 10 per cent rally in the benchmark index. JSPL has been the top performer among mainstream ferrous players with a robust return of 36 per cent in past 3 months. In past one month, the stock has rallied 12 per cent, as compared to 4 per cent decline on the Sensex.

Analysts at ICICI Securities envisage further upside in the stock driven by cost-efficiencies as captive thermal coal mines ramp up; logistical advantages from new conveyor belt and slurry pipeline; upcoming capacity expansion of 6mtpa at Angul expected to result in a volume CAGR of 11 per cent through to FY25E; and acquisition of Monnet Power Company’s assets, which is likely to reduce costs further.

“In our view, Monnet Power Assets, once operational, will provide an opportunity for the company to improve the heat rate, resulting in lower usage of coal in the power plant. Besides, proximity to Utkal mine is likely to reduce operating costs. Together with the benefit of captive coal supply, we expect 40 per cent lower power cost at Angul by FY25E,” analysts said in stock report.

Meanwhile, in terms of pricing, both longs and flats showed significant price erosion during July-September quarter (Q2FY23). While on the raw material front, recessionary concerns and lower demand forecast impacted the commodity prices globally, the benefit of the low raw material prices was not fully reflected in the reported quarter, JSPL said while announcing Q2 results on November 10, 2022.

On the treasury front, JSPL has prepaid its entire overseas long term debt & even refinanced a portion of its standalone debt. JSPL’s consolidated net debt further reduced to Rs 7,054 crore on the back of these repayments as well as working capital release. Net Debt to EBITDA (LTM) as on Q2FY23 was 0.62x.