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JSP's Expansion Projects and Margin Upscaling: A Growth Outlook

  • JSP's expansion projects, announced in May 2021, are set to gradually commission starting 2QFY24E, boosting earnings from 2HFY24E.

  • Expansion projects are categorized into capacity expansion, backward integration, and forward integration.

  • Capacity expansion includes brownfield expansion to increase total capacity to 15.9 mtpa from the current 9.6 mtpa.

  • Backward integration projects, such as a pellet plant, slurry pipeline, and coal mines, will start commissioning from 2QFY24E, improving the production chain.

  • Forward integration projects like the hot strip mill, thin slab caster, and rail mill will aid downstream volumes and upgrade the product mix from 3QFY24E.

  • Ongoing projects are expected to uplift JSP's steel margins by approximately Rs4,000/ton at full capacity.

  • Captive coal mines, pellet plants, slurry pipelines, and hot strip mills will significantly reduce costs and expand margins.

  • JSP could further enhance its product profile and announce downstream capex, aligning closer to JSW & TATA.

  • Estimated capex of Rs270 bn over FY2024-26E, higher than the announced plan, with earnings contribution expected from 2HFY24.

  • Despite increased capex, JSP's leverage will remain low, with net debt/EBITDA projected to be <1X over FY2024-26E, peaking at 0.8X in FY2025E.

  • JSP's growth, return, and strong balance sheet position make a compelling case for re-rating in the market.


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