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.