Jindal Steel & Power gains on strong operational performance in Q1

Jindal Steel and Power has rallied 5% to Rs 288 after reporting a better-than-expected consolidated net profit at Rs 418 crore for the quarter ended June 30, 2014 (Q1), due to strong operating performance of standalone steel business. The company had profit of Rs 494 crore in the same quarter last fiscal.

Net sales declined 10% year-on-year (yoy) to Rs 4,978 crore due to lower sales volumes for both steel and pellets.

Analysts on an average had expected profit of Rs 376 crore on sales of Rs 2,452 crore.

However, on operational front, the company’s profit increased by 25% yoy to Rs 1,629 crore and EBITDA margin by 400 basis points to 33% from 29% during the recently concluded quarter.

Sanjay Jain, analyst at Motilal Oswal Securities maintains ‘buy’ rating on the stock with target price of Rs 379.

Analyst expects consolidated EBITDA to grow at CAGR of 14% over FY14-17 as a benefit of new capacity addition in both steel and power.

Steel demand has bottomed out in western world, yet the recovery remains gradual. Steel demand in world (ex-China) has started to accelerated, which will help Indian mills command better regional premiums, says analyst in research report.

The stock opened at Rs 277 and hit a high of Rs 291 on NSE. A combined 6.53 million shares changed hands on the counter so far on NSE and BSE.