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Jindal Stainless Q3 results review: Lower volume impacts standalone EBITDA, says Nuvama; downgrades to ‘hold’
- Jindal Stainless's standalone EBITDA for Q3FY24 dropped by 4.5% QoQ due to lower volume, while EBITDA/t increased by 1.3% QoQ. Brokerage Nuvama Institutional Equities reduced FY24E/25E EBITDA for Jindal Stainless by 3.1% and 2% respectively, citing lower volume and profitability.
Lower volume hurts Jindal Stainless's standalone earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the quarter that ended in December (Q3FY24), according to a report by brokerage Nuvama Institutional Equities.
Due to a factory downtime, Jindal Stainless's volume fell by 6% on a quarter-over-quarter (QoQ) basis, resulting in a 4.5% QoQ drop in standalone EBITDA to ₹1,020 crore (in line with the brokerage's expectation).
EBITDA/t, on the other hand, increased 1.3% QoQ to ₹19,938. Nevertheless, the brokerage said that because of better foreign subsidiary performance and the entire impact of Jindal United Steel Limited's (JUSL) EBITDA, consolidated EBITDA at ₹1,230 crore up 1.3% QoQ.
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In light of lower volume and profitability and the expectation that growth would slow down in FY26, the brokerage reduced FY24E/25E EBITDA by 3.1% and 2%, respectively.
"Until then, the stock is likely to consolidate with limited upside potential. Rolling over to FY26E yields a fair value of ₹578 (earlier ₹533) at 7x EV/EBITDA; downgrade to ‘HOLD’," the brokerage said.
Jindal Stainless was able to mitigate lower fixed-cost absorption despite overall reduced volume by improving its product mix. When compared to EBITDA/t, which increased 1.3% QoQ to ₹19,938/t, gross margin increased 10% QoQ to ₹58,503/t. The ₹190 crore dividend from Jindal United Steel Limited was included in the ₹230 crore other income (knocked off in consolidated). Improved foreign subsidiaries' financials contributed to Jindal Stainless's 1.3% QoQ increase in consolidated EBITDA of ₹1,250 crore.
The brokerage claims that in Q3FY24, the company invested around ₹900 crore in capital expenditures (capex), which included investments of ₹465 crore in an Indonesian pig iron plant and ₹96 crore for the purchase of Rabirun Vinimay Private (RVPL). Consolidated net debt decreased to ₹4,825 crore as a result, up ₹274 crore QoQ. Moreover, the sale of JSL Board's 26% ownership in Jindal Coke has received in-principle approval.
“We have factored in growth of the current expansion, and estimate profit in FY25 shall rise 37% YoY, but taper to 10% YoY growth in FY26. Any benefits of the next phase of expansion, if any, shall accrue only FY27 onwards,” the brokerage said.
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Business NewsCompaniesCompany ResultsJindal Stainless Q3 results review: Lower volume impacts standalone EBITDA, says Nuvama; downgrades to ‘hold’
First Published:20 Jan 2024, 04:45 PM IST
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