Jindal Steel and Power Limited (JSPL) has announced a significant turnaround in its fourth-quarter financial performance, swinging to a profit of Rs 1,045 crore compared to a loss of Rs 339 crore in the corresponding quarter of the previous fiscal year. The steel major's consolidated revenue also saw a healthy increase, climbing 23 percent to Rs 16,218 crore.
The company's Q4 adjusted EBITDA stood at Rs 2,650 crore, surpassing estimates of Rs 2,400 crore and marking a 66% sequential increase. EBITDA per tonne reached Rs 10,103, up Rs 3,117 per tonne quarter-on-quarter, driven by higher prices and increased sales volume. Sales for the quarter rose 15 percent sequentially to 2.62 million tonnes, while production reached 2.65 million tonnes, a 6 percent growth over Q3.
Nuvama's 'Reduce' Call Amid Profit Surge
Despite these robust results, Nuvama Wealth has maintained its 'Reduce' call on Jindal Steel shares, setting a target price of INR 1,154. Nuvama values the stock at 7x FY28E EV/EBITDA, noting that at current market prices, the stock trades at 9.6x/7.3x FY27E/28E EV/EBITDA.
Nuvama analysts expect JSPL's profitability to peak in Q1FY27, projecting an EBITDA/tonne of Rs 13,000. This is attributed to the benefits of higher steel prices offsetting increased raw material costs in the upcoming quarter. Jindal Steel's earnings were also positively impacted by the imposition of safeguard duties on certain grades of imported flat steel, which provided price support for its products.
Future Outlook: Demand and Supply Concerns
However, Nuvama's cautious stance stems from its long-term outlook on the steel market. The brokerage anticipates a subsequent fall in steel prices from Q2FY27 onwards. This decline is expected to be driven by a combination of higher supply entering the market and a potential decrease in demand, which would negate the benefits of higher volumes. Nuvama believes that while steel prices may peak in the near term, downside risks will emerge from lower demand and a recovery in overall steel production, leading to a peak in JSPL's profitability.
Therefore, Nuvama has retained its FY27E/28E earnings estimates, advising caution despite the recent strong quarterly performance.