- Q3 EBITDA fell 20% YoY, yet volumes jumped 20% driven by new BF2/BOF2 capacity.
- Operating costs surged from higher coke purchases and coal prices, compressing margins.
- Management projects a 15%+ volume surge in Q4 as the captive coke oven battery comes online.
- Current valuation: 9.2x FY27 EBITDA, 6.5x FY28E EBITDA – still below peer multiples.
- Bull case hinges on margin recovery; bear case rests on prolonged raw material cost pressure.
Most investors skimmed Jindal Steel’s Q3 miss—big mistake.
Why Jindal Steel’s Q3 EBITDA Drop Beats Industry Trends
Jindal Steel reported an EBITDA of Rs 6.99 bn for Q3FY26, down sharply from the prior quarter. The headline decline is not a pure demand story; it stems from a temporary cost shock. External coke purchases added Rs 3.5 bn to operating expenses, and a $2/ton rise in coking coal further squeezed the bottom line. Yet, the company’s net sales revenue (NSR) fell 7.2% QoQ, outpacing the sector’s average contraction, indicating that price pressure was broader than just Jindal.
Understanding EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) is crucial. It strips out financing and accounting choices, offering a clearer view of operational cash generation. When EBITDA falls while volume grows, the red flag is usually margin erosion—not a demand slump.
How the Captive Coke Oven Battery Could Flip the Earnings Curve
The management’s roadmap centers on the captive coke oven battery (COB). Once fully operational, the COB will replace costly external coke purchases, shaving off the Rs 3.5 bn OPEX hit seen in Q3. Moreover, the battery is expected to produce higher‑quality coke at a lower per‑ton cost, directly boosting gross margins on flat products.
Higher steel prices—currently on an upward trend due to global supply tightness—amplify this effect. With steel prices climbing, each rupee of saved coke cost translates into a larger contribution margin. The company predicts EBITDA recovery in Q4, backed by a 15%+ volume surge and an improving cost structure.
Competitor Landscape: Tata Steel, JSW, and the Race to Low‑Cost Steel
Peers are not standing still. Tata Steel has accelerated its green steel initiatives, while JSW Steel is expanding its integrated coal assets to lock in lower coking coal costs. Both firms report EBITDA margins hovering around 10% for the same quarter, marginally better than Jindal’s 8% after the cost shock.
Jindal’s advantage lies in its faster ramp‑up of BF2 and BOF2, delivering a 20% YoY volume boost. If the captive COB delivers the projected cost savings, Jindal could undercut peers on unit cost, reclaiming margin leadership.
Historical Parallel: 2018 Steel Cycle and What It Taught Investors
In late 2018, several Indian steelmakers faced a similar earnings dip due to raw material price spikes. Those that had already invested in captive coke plants (e.g., Steel Authority of India) rebounded faster, posting a 12% YoY EBITDA increase in the following quarter. The market rewarded the cost‑control narrative, lifting share prices by over 25% in six months.
History suggests that a temporary earnings dip, when paired with a clear cost‑reduction roadmap, can be a catalyst for outsized upside.
Investor Playbook: Bull vs Bear Cases for Jindal Steel
Bull Case – The captive coke oven battery goes live on schedule, trimming OPEX by ~Rs 3 bn. Steel prices stay elevated, supporting a 15%+ Q4 volume jump. EBITDA margins recover to 10%+, pushing FY27 EV/EBITDA multiples to 8x. Stock re‑rates to Rs 1,250, delivering ~30% upside from current levels.
Bear Case – Delays in the COB or a sudden dip in global steel prices compress margins further. Coking coal costs remain sticky, eroding any volume gains. EV/EBITDA multiples contract to 5x as investors price in lower growth, pulling the stock toward Rs 950.
At a current EV/EBITDA of 9.2x for FY27, the valuation still offers a margin of safety against the bull scenario while leaving room for upside if the turnaround materializes.