Shares of Jindal Steel and Power Ltd (JSPL), also referred to as Jindal Steel, took a significant hit on Friday morning, falling by 10% after the company released its earnings report for the third quarter (Q3) of fiscal year 2024-25. The company, a major player in the steel manufacturing industry, reported a 51% year-on-year decline in net profit for the quarter ending December 31, 2024. Net profit fell to Rs 951 crore, which came as a surprise to many investors who had hoped for better performance in a recovering global steel market.
Despite a slight rise in consolidated revenue to around Rs 11,751 crore, the earnings before interest, taxes, depreciation, and amortization (EBITDA) showed a significant dip of almost 24% year-on-year to Rs 2,133 crore. This poor performance came amid several challenges in the steel sector, with rising costs, particularly iron ore, which have severely impacted the company’s profitability.
The Iron Ore Price Impact and Lower EBITDA Per Tonne
A key reason for the sharp decline in Jindal Steel’s earnings was the surge in iron ore prices. The company stated that the increase in the cost of iron ore was a significant burden on its operations. As a result, the EBITDA per tonne for JSPL stood at Rs 11,209, which was lower than the previous quarter’s performance. While this figure still indicates healthy profitability, it reflects a sequential decline, signaling that the company is struggling to maintain its margins in the face of rising raw material costs.
The steel industry, which is highly dependent on raw material costs, has faced inflationary pressures due to increasing prices of key commodities like iron ore and coal. For Jindal Steel, the price hike in iron ore has affected its ability to maintain healthy margins, a challenge that is not unique to them but is widespread in the industry. These factors combined contributed to the company’s underperformance in Q3.
Stock Performance and Investor Sentiment
In response to the earnings report, JSPL’s share price fell sharply, marking a 10% drop to Rs 756.10 on the Bombay Stock Exchange (BSE) in early trade. This marks a notable decline from its 52-week high of Rs 1,097.10 on June 21, 2024. The stock had reached a high due to favorable market conditions and strong demand for steel, but the latest earnings report has shaken investor confidence.
Over the past year, the stock has seen significant volatility, hitting a 52-week low of Rs 708.80 on February 13, 2024. The drop has been accompanied by lower-than-expected trading volume, with 2 lakh shares changing hands, translating to a turnover of around Rs 15.11 crore on BSE.
JSPL’s share price has been a multibagger over the last five years, posting an impressive 329% return. However, the stock’s volatility has also been a point of concern for investors. It has a one-year beta of 1.3, indicating high volatility compared to the broader market. Despite the recent sharp fall, the stock is neither overbought nor oversold, with a Relative Strength Index (RSI) of 31.9. This suggests that while the stock has taken a hit, it is not in an oversold condition yet.
Technical Indicators and Future Outlook
Currently, Jindal Steel’s shares are trading below several key technical indicators, including the 10-day, 30-day, 50-day, 100-day, 150-day, and 200-day moving averages. This bearish pattern indicates that the stock is in a downtrend in the short to medium term. Investors and analysts are closely monitoring the situation, as a recovery in the JSPL share price will depend on how the company manages rising costs and its ability to return to profitability in the upcoming quarters.
Looking ahead, Jindal Steel faces several challenges, including fluctuating raw material costs and potential slowdowns in steel demand. However, the company’s strong historical performance and its role as a key player in India’s steel sector could help it weather the storm in the long run.
Conclusion
JSPL’s share price and Jindal Steel’s stock have taken a hit following the disappointing Q3 earnings report. However, it’s important to note that Jindal Steel has been resilient in the past and has delivered strong returns over the last five years. The company will need to address the rising iron ore costs and improve operational efficiencies to restore investor confidence and bring its stock back on a growth trajectory.
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