Jindal Steel shares hit four-month low post Q2 earnings; what should investors do?

Shares of multibagger Jindal Steel & Power Ltd (JSPL) tanked 7% to a four-month low on Wednesday post Q2 earnings. Profit rose 6.3 times in the September quarter to Rs 1,390.1 crore against Rs 219.3 crore in the September 2022 quarter. However, the steel company's consolidated net revenue slipped 9.2% to Rs 12,282 crore in the last quarter.

JSPL stock crashed 6.96 per cent at Rs 590 against the previous close of Rs 634.15 on BSE. Market cap of Jindal Steel fell to Rs 60,715.64 crore. JSPL stock has gained 0.21 per cent since the beginning of this year and risen 28 per cent in one year. JSPL shares have delivered multibagger returns of 211% in the last three years.

A total of 1.45 lakh shares of the firm changed hands amounting to a turnover of Rs 8.68 crore on BSE.

The stock has a one-year beta of 1.4, indicating very high volatility during the period.

In terms of technicals, the relative strength index (RSI) of Jindal Steel stands at 33.4, signaling the stock is neither oversold nor overbought. Jindal Steel stock is trading lower than the 10 day, 30 day, 50 day, 100 day, 150 day and 200 day moving averages.

Nuvama Institutional Equities has lowered its target price for JSPL stock to Rs 879 against the earlier Rs 969 post Q2 earnings. It cited lower steel prices as a reason for weak EBITDA.

"In addition to weak operating numbers in Q2FY24, we are disappointed with further capacity expansion delays by six months and incremental capex (Rs 31000 crore versus Rs 24000 crore earlier). JSPL’s Q2FY24 consolidated adjusted EBITDA, at Rs 2210 crore , decreased 18% QoQ with EBITDA/t of Rs 11,008 (our estimate: Rs 13,035/t), down Rs 3,688/t QoQ due to lower steel prices partially offset by lower CoP. We are cutting FY24E/25E EBITDA by 12%/8% factoring in weak Q2 earnings and delay in projects, leading to lower volume and high capex in FY25E. Our FY26E numbers are unchanged. Near-term weakness in the stock should be viewed as a buying opportunity; ‘BUY’ with a target price of Rs 879 (earlier Rs 969), valuing at 6 times average FY25E/26E EV/EBITDA," said the brokerage.

“EBITDA was hit due to lower steel prices partially offset by lower CoP Consolidated adj. EBITDA at INR22.1bn, down by 18% QoQ, and EBITDA/t stood at Rs 11,008, down 25% QoQ. Standalone revenue at Rs 12,080 crore was down 2% QoQ due to lower realisation, partially offset by higher volume,” added Nuvama.

Financial services firm Motilal Oswal lowered its EBITDA estimates for two fiscals and reiterated its buy stance with a revised target price post Q2 earnings.

“Considering the substantial increase in coal cost in the last few months and delayed capex, we have revised our FY24E and FY25E EBITDA estimates down by 13%/6%. We reiterate our BUY rating on JSPL with a revised target price of Rs 730, based on 5.5x FY25E EV/EBITDA. We believe JSP’s focused approach on deleveraging, presence across VAP, and robust domestic demand augur well for the company. The stock is currently trading at 4.8x FY25E EV/EBTIDA and 1.3x FY25E P/B,” said Motilal Oswal.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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