Jindal Stainless Hisar Ltd Research Report By Edelweiss

Stronger volumes & profitability improvement continues

Jindal stainless (Hisar)(JSHL) reported healthy growth of 35.2% in net revenues to reach INR 2439cr as company’s volumes grew at 8.3% on yoy basis while sales per ton increased by 24.8% over Q3FY17. Volume growth of 8.3% has come in in line with the growth in the industry.

For 9MFY18, volumes have grown by 14.6% against industry growth of 8%. During Q3FY18, EBIDTA grew by 43% to INR 325cr while EBIDTA/ton grew by 32% to INR 17,196/ton. Net profits grew by 122% to INR 114 cr as higher EBIDTA along with marginal decrease in interest expenses boosted net profits. JSHL realised net forex gains of INR 20cr during the quarter.

We are revising our estimates for both FY18E and FY19E due to higher than expectation performance by the company in this quarter. We are revising net sales by 6%/6%, EBIDTA by 13.3%/7.4%, and net profits by 22.8%/9.9% respectively for FY18E/FY19E.

We are revising volume numbers for FY18E and FY19E by only 1% to 753,346 tons and to 828,681 tons respectively.During FY17-19E, RoCE is expected to improve from 20% to 23.1%.

We are maintaining our ‘BUY’ recommendation on the stock with a price target of INR 319 per share, valuing consolidated business at INR 288/share (6.5x EV/EBIDTA on FY19E basis) and valuing
equity stake in JSL at INR 31/share.

Volume growth in Q3FY18 in line with the market –9MFY18 growth remains above industry due to aggressive expansion

JSHL reported volume growth of 8.3% in line with market growth of ~8% while on 9MFY18 basis volumes have grown at 14.6%, capturing market share from Chinese and unorganised players. JSHL continued to witness strong traction in the Architecture, Building, Construction (ABC) and Automotive, Railways, & Transport (ART) segments due to pick up in capex related to railways, metros, and strong momentum in auto sector volumes.

JSHL is also gearing up capacities for new demand segments like defence and nuclear along which is expected to be healthy in the future as import substitution picks up.

Profitability improves on yoy and qoq basis, Balance sheet strengthens JSHL has been able to pass on the increase in prices of both Nickel and FeCr. During Q3FY18, EBIDTA/ton improved from INR 13,023/ton in Q3FY17 to INR 17,196/ton. JSHL’s EBIDTA grew by 43% on yoy basis to INR 325cr while EBIDTA margins improved to 13.3% from 12.6% in Q3FY17.

Interest expenses have dropped to INR 97cr in Q3FY18 from INR 100cr in Q3FY17 and INR 102cr in Q2FY18. Adjusting for extraordinary income of INR 20cr from forex movement, net profits grew by 122% to INR 114cr.