Jindal Steel and Power reported a strong June quarter with EBITDA hitting Rs 26.6 billion, driven by 17% higher sales volumes. While Nomura maintains a positive view, it lowered its target price to Rs 1,300, citing future profit pressure from rising coking coal costs and seasonal demand cooling.
Detailed Coverage
Jindal Steel and Power reported a strong performance for the June quarter, with consolidated EBITDA reaching Rs 26.6 billion. This result outperformed market expectations, primarily due to higher-than-expected sales volumes and stable prices for its products, even as rebar prices showed signs of softening. The company saw its consolidated volumes climb 17% compared to the same period last year, reaching 2.23 million tonnes.
Operational Performance vs Cost Headwinds
Despite a 16% quarter-on-quarter increase in conversion costs caused by scheduled maintenance activities, the company’s strong operational efficiency helped keep margins stable. As a result, the profit per tonne improved by 18% sequentially to Rs 11,950, a figure that exceeded analyst projections. This operational buffer was crucial in balancing the rising costs associated with maintaining large-scale steel manufacturing units.
Challenges in the Coming Quarter
Looking toward the September quarter, analysts anticipate potential pressure on profitability. While the company is expected to maintain steady sales volumes of approximately 2.2 million tonnes—supported by the increased production capacity at its Angul blast furnace—seasonal factors are likely to weigh on domestic demand. This is expected to put downward pressure on rebar prices, potentially leading to a decline in overall price realization of about Rs 3,400 per tonne.
Additionally, input costs remain a key monitorable. Projections indicate a rise in coking coal expenses by approximately $15 per tonne. These combined factors—higher raw material costs and lower expected selling prices—have led to downward revisions in earnings forecasts for the coming fiscal years. Specifically, expectations for EBITDA in FY27, FY28, and FY29 have been moderated to account for these market pressures.
Long-Term Asset Optimization
Despite the near-term adjustments in price targets, the long-term outlook remains focused on asset optimization. The company has recently brought new production capacities online, which are expected to drive growth with relatively lower requirements for new capital spending. Investors are likely to track how effectively the company manages these higher input costs and whether the ongoing volume ramp-up at the Angul facility can sustain momentum in a seasonally slower domestic market. The company’s ability to maintain disciplined capital allocation while navigating these cost headwinds will be an important factor for future performance assessments.