Fresh triggers for Jindal Steel and Power

Rising steel capacity, power segment outlook point to robust earnings

Jindal Steel and Power

(JSPL) has been in news recently, and for good reason. The most recent are the strong steel production and sales figures for the June quarter. A few days back, its power segment also received a ratings upgrade. Following these developments and an

18 per cent correction in its share price since record levels hit in January, analysts believe it offers a good opportunity for long-term by improving domestic investors. demand and realisation as

To being with, JSPL on well as capacity expansion at Tuesday said steel sales its 6 million tonne Angul jumped 46 per cent year on plant. Moreover, while its 3 year, and production grew 36 million tonne basic oxygen per cent, year on year, during furnace has started in the June quarter. This means, December last year, the soontoits steel segment will continue commissioned two to post strong improvement MTPA in direct- performance, reduced aided iron plant at Angul will improve its capacity utilisation for Jindal Power's (JSPL's from the current 60 per power subsidiary) credit cent. Additionally, JSPL's cost portfolio of ~98.88 billion. of production, which has The revision in rating factors been improving, will see the in the in JSPL'ssignificant turn around profile credit per tonne cost decline by about ~2,000 as the plant goes during the last few on stream. quarters and the improving

The power business, revenue outlook of Jindal which has been a laggard, is Power. capacities Analystsbelieve merchant low with also seeing improvement.

The jump in merchant power variable cost such as those rates, which has now stabilised of Jindal Power will either at elevated levels, will be able to seek PPAs or add to profits and should realise better margins in also lead to new short to merchant power sale. The medium term power purchase biggest gain in equity value agreements (PPAs). is likely to accrue to JSPL,

JSPL is planning to according to analysts at increase plant utilisation to Motilal Oswal Securities 50 per cent from the 2017-18 who also believe that riding few level short of 37 to per medium cent with term a a strong is the steel best cycle, play thecompanya from PPAs under negotiation. perspective of two to three Recently, ICRA, too, upgradedfurther years. the ratings outlook to stable