JSPL’s Q1 Num­bers Show It’s Getting Back on Track

Co’s sec­ond suc­ces­sive quar­ter of Ebitda growth, its An­gul plant com­ing on line and firm steel prices al­lay concerns over abil­ity to ser­vice debt and fu­ture growth

The Economic Times - - Smart - JUN FY18 YOY CHG

26% 33% Op­er­a­tional Per­for­mance Trends The com­pany’s power seg­ment op­er­ated at 46% util­i­sa­tion. Up­pal ex­pects a pickup in the power busi­ness in the next three quar­ters.

If the steel prices re­main firm and the com­pany is able to ramp up pro­duc­tion, it may out­per­form peers such as JSW Steel and Tata Steel. An­a­lysts ex­pect JSPL to de­liver 35% EBITDA growth for the next two years in com­par­i­son with 18-20% ex­pected growth for Tata Steel and 15% growth for JSW Steel.

JSPL is ex­pected to op­er­ate at 73% ca­pac­ity util­i­sa­tion in steel and may con­tinue to do so in the fol­low­ing years with­out ma­jor capex, pro­vided that steel de­mand con­tin­ues to grow.

Af­ter valu­ing JSPL’s power busi­ness at 30% dis­count to re­place­ment cost, its steel busi­ness is val­ued at 5.9 times FY19 ex­pected EBITDA as com­pared with 5.4 times in case of Tata Steel and 6.9 times for JSW Steel. If JSPL de­liv­ers ex­pected earn­ings growth, its val­u­a­tion mul­ti­ple may ex­ceed that of its peers in the com­ing quar­ters.

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