Jindal Steel & Power’s (JSPL) positive price-cost spread has impressed analysts at ICICI Securities, who see “exciting prospects ahead,” despite a reported 67.9% decline in consolidated net profit for the December quarter.

The Jindal Steel & Power Analyst: ICICI Securities analysts led by Amit Dixit maintained their Buy rating for the stock with a target price of ₹750, recommending the stock as their top pick in the space.

The Jindal Steel & Power Thesis: JSPL on Tuesday reported a 67.9% decline in consolidated net profit to ₹518.67 crore for the December quarter. JSPL's quarterly numbers also revealed a 5.5% drop-off in sales volumes in the quarter which the brokerage firm attributes to rake/wagon wheel shortage and lower export opportunities, which therefore led to a fall in proportion of exports to 5% from the previous quarter’s 11%.

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Jindal steel and Power also reported production of 2.06 Metric tonnes during the quarter, which was 13% higher than its previous quarter. As noted by analysts, JSPL’s upcoming capacity expansion of six metric tonnes per annum at Angul (Odisha) is expected to help improve the company’s volume CAGR over the upcoming years.

The analysts at ICICI Securities also noted a drop off in the performance of JSPL’s overseas subsidiaries thanks to lower “coking coal realisation” — an essential input for the production of iron and steel – and higher ash content at the company’s Australian mines.

The firm expects profitability to improve as “domestic thermal coal availability has improved and the price is higher by 1-2% QoQ.” Sales volume is also expected to improve in what is traditionally a strong quarter for steel and power companies.

“We perceive JSPL to be on the right track with lower debt and upcoming cost efficiencies helping it in a tough macro environment of subdued steel prices,” added the analysts.

Price Action: Jindal Steel & Power was up around 6% to trade at ₹618.85 in the post-budget hour of trading on Wednesday.

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