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Shares of Jindal Steel & Power (JSPL) reached a new all-time high of Rs 610.25 on the BSE during the intraday trading session on Wednesday, gaining 2% in a market that was generally volatile due to an improved outlook. The stock reached a price that has not been seen since March of 2012. At the same time (9:38 AM), the S&P BSE Sensex had increased by 0.10 percent and was at 60,176.
The price of JSPL on the market has increased by 74% over the course of the last six months, which compares to a surge of 10% in the benchmark index. With a healthy return of 36% over the course of the last three months, JSPL has distinguished itself as the top performer among mainstream ferrous players. In the previous month, the stock had increased by 12%, which compares well to the Sensex’s drop of 4% during the same time period.
The analysts at ICICI Securities anticipate further gains in the stock as a result of cost efficiencies brought about by the ramping up of captive thermal coal mines; logistical advantages brought about by the new conveyor belt and slurry pipeline; the upcoming capacity expansion of 6 mtpa at Angul, which is anticipated to result in a volume CAGR of 11 percent through FY25E; and the acquisition of Monnet Power Company’s assets, which is likely to reduce costs even further.
“In our view, Monnet Power Assets, once operational, will provide an opportunity for the company to improve the heat rate, resulting in lower usage of coal in the power plant.” Besides, proximity to the Utkal mine is likely to reduce operating costs. “Together with the benefit of captive coal supply, we expect 40 percent lower power costs at Angul by FY25E,” analysts said in a stock report.
In the meantime, with regard to pricing, longs and flats both showed considerable price erosion throughout the period of July–September (Q2 FY23). While on the raw material front, recessionary concerns and a lower demand forecast impacted commodity prices globally, JSPL said that the benefit of the low raw material prices was not fully reflected in the reported quarter when it announced Q2 results on November 10, 2022. This was stated in conjunction with the announcement of Q2 results.
Treasury-wise, JSPL has made some headway, having paid off all of its long-term debt incurred overseas and even refinancing some of the company’s standalone debt. As a result of these repayments as well as the release of working capital, JSPL’s consolidated net debt was brought down even further and is now at Rs. 7,054 crore. As of the end of Q2 FY23, the ratio of net debt to EBITDA (LTM) was 0.62x.