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
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.