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Business News/ Companies / Company Results/  Jindal Stainless Q3 results review: Lower volume impacts standalone EBITDA, says Nuvama; downgrades to ‘hold’
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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.

Despite lower volume, Jindal Stainless's EBITDA/t increased 1.3% QoQ to ₹19,938. Consolidated EBITDA was up 1.3% QoQ due to better foreign subsidiary performance.Premium
Despite lower volume, Jindal Stainless's EBITDA/t increased 1.3% QoQ to 19,938. Consolidated EBITDA was up 1.3% QoQ due to better foreign subsidiary performance.

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).

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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.

Also Read: IREDA Q3 Results: Net profit jumps 67.15% on year to 335.5 crore, revenue up 44%

"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.

Also Read: ICICI Bank Q3 Results LIVE Updates: Net profit rises 23.5% to 10,272 crore, NII up 13% YoY

“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. 

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 20 Jan 2024, 04:45 PM IST
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