Jindal Stainless Steel reported a PAT of Rs. 329 crores.
JSL reported a steady operational performance for the quarter,with a consolidated PAT of Rs.329 crore. JSL’s standalone operations reported a sales volume of 235530 tonnes and a total revenue of Rs.5336 crores. The standalone operations EBITDA/tonne came in at 22216/tonne, and the consolidated top line for the quarter was at Rs. 5474 crores, up 36% YoY but down 17% QoQ. For Q1FY23, JSL reported consolidated EBITDA of Rs. 549 crore, down 9% YoY and 35% QoQ. On a consolidated basis, JSL reported an effective tax rate of 23%, compared to 33% in Q1FY23. Hence, due to a lower-than-expected effective tax rate, JSL’s consolidated PAT came in higher. JSL’s consolidated PAT for Q1FY23 was at 329 crore, up 8% YoY but down 56% QoQ.

JUSL to be acquired:
The options are being reconsidered for the blast furnace capex, which was earlier considered in JUSL. The management was clear on the cost competitiveness of the pig iron route for 400 series production along with liquid ferrochrome. However, management was aware of the potential future balance-sheet stress caused by the investment, as well as the related-party transactions and roadblocks to a potential future merger. The management wants to minimise related-party transactions and is also looking at likely options for JSL to acquire JUSL and thereby maintain the favourable tenure of term loans present in JSL’s books.
There is a huge risk from Indonesian exports in the 200/300 series in India. Even for the industries linked to approval/accreditation, depending on the extent of interest from the Indonesian players, we see a possibility of imports increasing substantially. The government has already removed the anti-dumping duty on stainless steel imports (Indonesia is an FTT partner, and does not charge any import duty on stainless steel imports). Perhaps, given the size of the market, policy support may not be as readily forthcoming for stainless steel as it is for steel.

Valuations:
The EPS was Rs. 6.11 in the June quarter versus Rs. 14.00 in March 2022 and Rs. 6.21 in June 2022. The stock is trading at a PE ratio of 3.70x. The EBITDA was at 3.22x. The ROCE and ROE stood at 37.8% and 45.1%, respectively. The stock was trading at Rs.134 on September 8th, up by 0.90%.