Jindal Steel & Power vs Jindal Stainless: The shares of various steel companies rallied in the financial year 2020-21 as they spoken record earnings considering of volume growth and margin expansion.

The steel stocks are in focus then with many companies giving multi-bagger returns to their shareholders. Are you eying any steel stock? How well-nigh the two Jindal companies? But which one of the two?

In this article, we’ll self-mastery a comparative wringer of Jindal Steel & Power vs Jindal Stainless, the two steel giants of the O.P. Jindal legacy.

Jindal Steel & Power vs Jindal Stainless

We’ll uncork our comparative study by reading well-nigh the two companies and understanding the differences between their business, scale and leadership. Without that, we’ll equip ourselves with a unenduring overview of the steel sector.

Next, we’ll race through the financials of the two stocks to victorious at their future plans. A summary concludes the vendible at the end.

Jindal Steel & Power vs Jindal Stainless – Visitor Overview

Jindal Steel & Power and Jindal Stainless were both promoted by the late Om Prakash Jindal (O.P. Jindal). He structured the Jindal Group such that Naveen Jindal got tenancy of Jindal Power & Steel while Jindal Stainless landed in the hands of Ratan Jindal. Let us now read well-nigh both companies.

Jindal Steel & Power

Jindal Steel & Power Ltd. (JSPL) was established in 1952 as a small steel manufacturing facility in Haryana. Over the last 70 years, the visitor has grown into one of the largest steel producers globally.

JSPL is an integrated-steel manufacturer undertaking end-to-end activities from the mining of coal and iron-ore to the production of iron, liquid steel and finished steel. Furthermore, it has repeater power plants for fulfilling its power requirements.

It has a total iron-making topics of 10.42 and a liquid steel production topics of 9.16 MTPA. Jindal Steel produces TMT rebars, plates & coils, sheet piles, round bars, railroad bars, wire rods, and other steel products.

Its steel operations are backed by its iron ore mines and coal mines, which meet nearly 60% of its total iron ore needs and 50% of its coking coal needs. The steel giant earns roughly 70% of its revenue from India and the wastefulness from exporting its products.

Its steel and repeater power operations are mostly located in Odisha and Chhattisgarh with coal and iron ore resources spread wideness multiple countries.

Jindal Stainless

Set up in 1970, Jindal Stainless Ltd. (JSL) is the top stainless steel producer in the country and one of the top five producers globally (ex-China). In terms of market capitalization, at Rs 30,000 crore, it is half the size of Jindal Steel & Power which is valued at Rs 62,500 crore.

JSL operates two stainless steel production plants in Haryana and Odisha. In addition, it moreover owns an overseas site in Indonesia which services the demand in South-East Asia and neighbouring regions.

It manufactures a wide variety of products such as stainless steel slabs, coils, plates, sheets, precision strips, and more. It has a total steel melting topics of 3MTPA. Jindal Stainless has a large portfolio of over 120 SKUs which are exported to increasingly than 40 countries.

JSL operates a robust distribution network of seven service centres and 14 offices which are located in India as well as abroad.

A key difference between JSPL and JSL is that JSL’s merchantry is increasingly directed towards value-added products such as cookware and consumer durables. However, JSPL’s merchantry is aimed towards the infrastructure industry.

We got a good understanding of the businesses of both companies for our comparative study of Jindal Steel & Power vs Jindal Stainless. In the next section, we’ll unenduring ourselves on the steel industry landscape.

Jindal Steel & Power vs Jindal Stainless – Industry Overview

India’s steel industry is the second largest in the world ranking without China. In FY22, the nation manufactured 118 MT of steel written for tropical to 15% of the worldwide steel demand.

Broadly, steel is a slow-growing industry with multiple end applications from construction, and residential, to automobiles and consumer durable goods. As a result, steel is a cyclical sector, latter pursuit economic upcycle and contraction.

In the past few years, the global industry underwent a big shift as the Chinese government came lanugo harsh on its steel producers to prorogue stat emissions. As a result, the Chinese steel exports reduced taking the prices to new highs and India emerging as a major exporter.

Thus, domestic steel producers posted record profits in the past few fiscals. However, the excitement fizzled as coking coal prices (which worth for ⅓ forfeit of the manufacturing of steel) increased compressing margin for the companies. The second half of FY23 was restrictedly largest with an easing of energy financing for steel manufacturers.

In the years ahead, the macro-environment is salubrious for non-Chinese steel producers with an uptrend in wanted expenditure, rising housing demand, and higher spending wideness various sub-sectors. All these developments have placed Indian steel companies in optimum position with many paying when their debts and announcing expansion plans.

Jindal Steel & Power vs Jindal Stainless – Financials

Revenue and Profit Growth

The total revenues of JSPL and JSL grew at a CAGR of 7.5% and 27.4% to Rs 52,768 crore and Rs 35,697 crore in FY23 respectively. The growth is not comparable as JSL underwent a merger with Jindal Stainless (Hisar) recently considering of which its revenue growth is inflated.

Similarly, the marrow line of JSPL was negative in FY19 written for heavy loss and write-off in its subsidiary. Overall, both companies have demonstrated top-line and bottom-line growth in the last five years on the when of volume growth and margin expansion.

The figures unelevated represent the total income and net profit of Jindal Steel & Power and Jindal Stainless for the last five years.

(figures in Rs Cr)

Profit Margins

Jindal Steel stuff an integrated player boasts of higher profit margins than Jindal Stainless. This is reflected in the higher operating profit margin of JSPL 13.9% compared to 5.5% of JSL. Historically, the margins were lower for both companies from their peak in FY21 considering of lower realisation and higher energy costs.

The table unelevated showcases the operating profit margins and net profit margins of Jindal Steel & Power and Jindal Stainless for the past few years.

(figures in %)

Return Ratios

We’ll now move on to study the profitability of both stocks for our comparative wringer of Jindal Steel & Power vs Jindal Stainless. JSPL reported lower return ratios in the recent fiscals on worth of exception items and a larger probity wiring (against that of JSL).

The table unelevated compares the return ratios (RoE and RoCE) of Jindal Steel & Power vs Jindal Stainless over the previous five financial years.

(figures in %)

Debt Analysis

The management of both companies did an impressive job of deleveraging their wastefulness sheets by paying when the debt. As a result, the debt/equity ratio of the two steel stocks came lanugo to 0.3 each in FY23 from their highs of upwards of 1. Likewise, their interest coverage ratio moreover improved.

The table unelevated highlights the resurgence in the debt/equity ratio and interest coverage ratio of Jindal Steel & Power vs Jindal Stainless.

Jindal Steel & Power vs Jindal Stainless – Future Plans

So far we looked at the previous fiscals’ data for our comparative study of Jindal Steel & Power vs Jindal Stainless. In this section, we’ll try to get some sense of what lies superiority for the companies and their investors.

Future Plans of Jindal Steel & Power

1. The visitor has earmarked a large wanted expenditure of Rs 24,000 crore over the next few years till FY27.
2. As a part of this, the visitor is directing 34% of the funds towards margin expansion which will help to momentum largest RoCE in coming years.
3. JSPL recently uninventive an under-construction 1,050 MW thermal power plant for its repeater power needs.

Future Plans of Jindal Stainless

1. JSL recently purchased Rathi Super Steel and uninventive a 49% stake in an Indonesian nickel pig iron smelting plant as part of its inorganic growth strategy.
2. The management believes that the visitor is in a sweet spot to take wholesomeness of operating leverage as incremental wanted expenditure required to bring revenue growth in future is low.

Jindal Steel & Power vs Jindal Stainless – Key Metrics

We are scrutinizingly at the end of our comparative study of Jindal Steel & Power vs Jindal Stainless. Let us take a quick squint at the key metrics of the two stocks other than those covered above.

Conclusion

As we conclude our comparative study of Jindal Steel & Power vs Jindal Stainless, we can say that at first instance JSL may towards to be a largest merchantry with higher return ratios. However, with JSPL’s heavy CAPEX plans in place and its focus on growing RoCE, it is not much overdue its smaller peer.

Thus, investors should closely track the quarterly earnings of both companies. Do you think JSPL will be worldly-wise to unhook on its CAPEX plans? Or is JSL a largest bet with higher return ratios? How well-nigh we protract this conversation in the comments below?

Written By – Vikalp Mishra

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