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Informist, Tuesday, Jan. 28, 2025

By Rajesh Gajra

NEW DELHI – The overhang of low-priced steel imports hitting domestic producers and an ongoing consumption slowdown in the domestic industry are likely to have affected the earnings of Jindal Steel & Power Ltd. in the December quarter. Analysts expect sales volume growth to be muted, remaining below 5% on year and flattish sequentially.

Analysts also expect realisations to be subdued, but not worse than that in the previous quarter. Some price hikes taken by the company in the first 36 days of the December quarter would have aided realisations. On Nov. 6, during a conference call following the announcement of the September quarter results, Jindal Steel's management had said the company had taken price hikes of INR 1,000-2,000 per tonne across products in the quarter till then. The management said that the demand post festive season was good and prices were holding up until then.

Jindal Steel will likely report a consolidated revenue from operations of INR 115.08 billion for Oct-Dec, according to an average of estimates by eight brokerage firms. This estimate of revenue from operations is 1.7% lower on year and 2.6% higher sequentially. The estimates range from a low of INR 107.65 billion by IDBI Capital Market Services to a high of INR 134.32 billion by Motilal Oswal Financial Services.

The analysts' estimates for Jindal Steel's net profit average INR 9.11 billion for the December quarter, down 53% on year and up 5.8% on quarter. Among the brokerages' net profit estimates, the highest is Motilal Oswal's INR 11.10 billion, while the lowest is INR 7.80 billion by Prabhudas Lilladher. The earnings before interest, tax, depreciation, and amortisation is estimated to be INR 23 billion, according to an average of estimates by seven brokerage firms.

During the December quarter, domestic steel prices decreased by INR 300 per tonne "due to influx of cheap steel imports," IDBI Capital said in its preview report. Kotak Securities' institutional equities team estimates Jindal Steel's volume to have increased 2.2% on year, and be flat on quarter, and expects steel realisations to be stable sequentially "as stronger rebar prices offset weakness in HRC (hot rolled coil) prices." The steel realisation would, however, be 6.2% lower on a year-on-year basis, Kotak said.

Jindal Steel's volume growth will likely be subdued in Oct-Dec "due to weak demand," according to brokerage Prabhudas Lilladher. The brokerage said a 5% sequential hike in long product prices taken by the company would lead to around 1% increase in net realisations.

The company will report its December quarter financial results Thursday. Post announcement, investors will track management commentary on the change in average selling price of steel for the company in the December quarter and the trajectory of cost of coal, according to Motilal Oswal Financial. The capex timeline commentary from the management will also be monitored, the brokerage said.

Jindal Steel also sources coal from its captive mines. In the September quarter it mined about 1.3 million tonnes from its 'Utkal C' mines. The company had guided for another captive mine 'Utkal B1' to start operations in Jan-Mar. Post announcement of December quarter earnings, analysts will seek management updates on this captive mine under construction and the output from active mines.

In the September quarter, Jindal Steel's consolidated revenue from operations had declined 8% on year to INR 112.13 billion, and the net profit had fallen 38% on year to INR 8.60 billion. At current price, shares of Jindal Steel are down 11.4% over the closing price just prior to the announcement of the September quarter financials on Nov. 6.

At 1108 IST, shares of the company were trading 1.3% down at INR 831.85 on the National Stock Exchange of India.

Following are the Oct-Dec consolidated earnings estimates for Jindal Steel & Power based on reports from eight brokerage firms in descending order of estimate of net profit:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Deepshikha Bhardwaj

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