31 Jan , 2025 By : Debdeep Gupta
Shares of Jindal Steel and Power were sharply down by more than 10% on January 31 after a weak December quarter result that saw the net profit fall by 51% on year and the EBITDA margin slipped to 18.59% as against 24.30% a year ago.
Citi has recommended a Sale on the JSPL stock with a target price of Rs 765 per share while the shares trade below that mark. The note added that investors may be concerned about the recently announced Rs 16,000 crore capex, spread over the next three years, till FY28. The new capital expenditure will not be adding any new steel manufacturing capacity but will be directed towards projects producing more value-added products, and increasing efficiency. Morgan Stanley has kept its 'Overweight' call on the stock but said that the additional capex has surprised them.
Read more on Jindal Steel's December quarter results right here. The net debt has gone up during Q3FY25, but it the context of expansion, the company called it reasonable in the earnings call. JSPL told analysts the company aims to target Return of Capital in high-teens, for all its plants, and maintained that a three-year capex of this magnitude is not very high for the scale of operations.
JSPL said India still being a net importer of steel during the December quarter has impacted pricing and realisations for domestic steel makers. India's steel demand has increased progressively, driven by the government's capex push, said JSPL, adding that the capacity and production continue to rise in line with the Centre's vision of 300 MT capacity by 2030.
JSPL added that India continues to see growth in steel demand, during 2024, and is projected to rise in 2025 too, by 8% annually. This came when the steel demand from the US, EU, and Japan all saw de-growth in 2024. Steel exports from China steel were short of all-time highs seen in 2015, indicating a weak economic outlook.
Shares of JSPL are down by 20% so far this year and are flat over the last year.
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