Jindal Steel & Power hits over 4-month high, zooms 60% in one month

Shares of Jindal Steel & Power (JSPL) hit an over four-month high of Rs 150, up 11 per cent on the BSE on Thursday on expectation of raw material benefits led by lower coking coal costs to offset the decline in steel prices in the near term.
The stock of the steel company was trading at its highest level since June 27, 2019. It has rallied 60 per cent in the past one month. In comparison, the benchmark S&P BSE Sensex has gained 8 per cent, while S&P BSE Metal index has climbed 17 per cent during the same period.

JSPL said it has emerged as the highest bidder for Gare IV/1 coal Block (rated capacity 6MTPA) in the recently held coal block auctions at a closing bid of Rs 230/t. This will help in increasing coal availability for the company’s overall operations. It will also help the country in reducing its dependence on coal imports.

Gare Palma IV/1 coal block has the potential to contribute a saving of Rs 1,500/ton with an annual capacity of 6MTPA as per the management, once requisite approvals are in place and the mine ramps up.

Meanwhile, JSPL reported a weak set of numbers for July-September quarter (Q2FY20), by posting a consolidated net loss of Rs 399 crore against net profit of Rs 279 crore in the year-ago quarter. Consolidated turnover declined 10 per cent to Rs 8,939 crore from Rs 9,982 crore in previous year quarter. Earnings before interest, tax, depreciation and amortisation (EBITDA) margin contracted by 400 basis points (bps) to 18 per cent from 22 per cent.

Analysts at Antique Stock Broking maintain BUY rating on JSPL with a revised SOTP of Rs 173 (earlier Rs 136) per share factoring in a decline in coal costs from the Gare Palma IV/1 coal block.

SBICAP Securities also maintains ‘buy’ rating on the stock with the target price of Rs 173 per share, as the brokerage firm reiterates that JSPL is still on a deleveraging path driven by the volume ramp-up at Angul.

“Angul continues to ramp up well and outlook for the Power business is also improving. JSPL is L1 in 515MW of bids and expects PPA for 315MW to finalize by Dec’19. Major capex for the company is now behind and along with ramp-up in volumes, FCF generation should continue,” Motilal Oswal Financial Services (MOFSL) said in a result update. The brokerage firm reiterates ‘Buy’ rating on the stock with a target price of Rs 170 based on SOTP.

At 02:46 pm, JSPL was trading 10 per cent higher at Rs 149, as compared to a 0.30 per cent rise in the S&P BSE Sensex. A combined 56 million shares changed hands on the counter on the NSE and BSE so far.