Brokerage firm Prabhudas Lilladher has maintained its buy rating on Jindal Steel & Power, highlighting a 27% year-on-year rise in sales volume during the second quarter of fiscal year 2027. The company's ability to manage production costs by using methane from its own coal gasification plant was a key factor in supporting margins. Investors may track how upcoming capacity expansions impact future earnings.
Jindal Steel & Power (JSPL) continues to see operational benefits from its Angul plant, which remained a primary driver of volume growth in the second quarter of fiscal year 2027. Recent data shows a 27% increase in sales volume compared to the same period last year. This performance was supported by the successful ramp-up of blast furnace operations at the facility and a strategy to reduce inventory levels to meet local market demand.
Operational Resilience and Profitability
A notable highlight for the quarter was how the company navigated potential production issues. When faced with disruptions in the supply of LPG, the company effectively switched to using methane generated from its own coal gasification plants. This operational flexibility allowed the company to keep production steady and avoid significant margin volatility. The adjusted operating profit per tonne stood at ₹10,522, showing stability despite the broader challenges in the steel sector.
Future Outlook and Risks
The brokerage anticipates a 25% compound annual growth rate in operating profit between fiscal years 2026 and 2029. This optimistic outlook is based on expectations of higher production capacity in the second half of the fiscal year. Key projects, such as the commissioning of a new slurry pipeline and the scaling of current infrastructure, are expected to facilitate this growth.
However, investors should monitor the impact of input costs. Elevated coking coal prices remain a potential risk for the steel sector, which could put pressure on profit margins if prices continue to rise. While the current stock valuation reflects a 6.3x and 5.8x multiple of enterprise value to operating profit for fiscal years 2028 and 2029, the actual financial outcome will depend on the company's ability to maintain high utilization rates and manage raw material costs effectively. The brokerage has factored these costs into its revised estimates, arriving at a target price of ₹1,245. The focus for shareholders will now be on the pace of project execution and the stability of global demand.