Jindal Steel & Power: A Not-So-Powerful Performance

Jindal Steel and Power (JSPL), which recently announced its June 2013 quarter results, witnessed pressure on its margins as well as volumes in the quarter. JSPL, on a consolidated basis, has put in a topline of Rs 4540.27 crore as against Rs 4701.47 crore for April-June 2012 and Rs 5648.44 crore for Jan-March 2013. On the bottomline front, the PAT for the June 2013 quarter stood at Rs 494.28 crore as against Rs 385.33 crore last year and Rs 760.23 crore in the March 2013 quarter.

If we take a look at the performance on a segmented basis, the Iron and Steel segment witnessed a major decline on the sales front on a sequential basis as well as marginal decline on a YoY basis. The power segment also witnessed a decline as the sales for the power segment stood at Rs 1086.38 crore for the quarter as compared to Rs 1275.01 crore in the corresponding quarter of the last fiscal and Rs 1130 crore in the March 2013 quarter.On the EBITDA front too, the performance has not been good in both the segments. For the iron & steel segment, it was Rs 669.89 crore as against Rs 959.31 crore for the power segment it stood at Rs 531.15 crore as against Rs 642.96 crore in the June 2102 quarter. Had it not been for exceptional losses in the June 2012 quarter, the profitability would have been lower for June 2013.

From the above financial performance, one can categorically say that steel companies are witnessing margin pressures along with volumes pressure. Going ahead, the performance of steel companies may get impacted on account of a slowdown in demand from China and an even slower pace of IIP in India. We feel that it would be better to avoid steel companies in the short term.