The shares of one of India’s leading steel manufacturers in India gained 3.2% to an intraday high of ₹784.80 per share after Motilal Oswal gave a buy call with an upside of 16%.
Jindal Steel & Power Ltd shares have gained a return of 19% in the last six months and 32% in the last year.
The company’s operational revenue has declined by 11 percent year on year from ₹12,452 crore in Q3FY23 to ₹11,071 crore in Q3FY24, while net profit increased by 272% from ₹ 518 crore to ₹1,928 crore.
Jindal Steel & Power Ltd(JSP) is one of India’s leading steel producers with a significant presence in sectors like mining and power generation. The group has a global presence through subsidiaries, mainly in Australia, Botswana, Indonesia, Mauritius, Mozambique, Madagascar, Namibia, South Africa, Tanzania, and Zambia.
Motilal Oswal Securities has recommended a buy call on Jindal Steel & Power Ltd. The brokerage has given a target of ₹900 per share, representing an upside of 16 percent from Wednesday’s trading price of ₹774 per share.
JSP is expanding its crude steel capacity from 9.6mt to 15.9mt and increasing finished steel capacity from 7.25mt to 13.75mt. Additionally, as part of the Angul expansion, JSP is establishing a 1.2mt downstream CRM complex, slated to be operational by 4QFY25, along with a 1050mw ACPP-II and 6mt pellet-II facility. Following the current capex, JSP plans to initiate the expansion of its Raigarh facility, targeting an increase in crude steel capacity by approximately 6mt to reach around 9.6mt. Motilal Oswal reported.
The company’s production and sales of 1.9 million metric tons each align with the brokerage’s estimates. EBITDA increased by 20% YoY to ₹28 billion, surpassing their estimates of ₹21 billion by 34%. This outperformance was driven by higher-than-expected NSR and reduced input costs, benefiting from the realization of advantages from the captive thermal coal mine.
Jindal Steel has recently commissioned its first rake of a 6 million-ton hot strips mill at the Angul plant. This move enables the company to serve vital industries including automotive, construction, oil, and color coating sectors. Motilal Oswal reported.
According to the brokerage, the ongoing capacity expansion in Odisha will boost the company’s crude steel capacity by over 65% to 15.0 million tonnes. Additionally, the brokerage anticipates that this expansion will lead to increased volume growth for the company and a reduction in structural costs.
JSP plans to invest ₹75-100 billion annually over the next three years. The CAPEX guidance for 1HFY24 increased by INR70 billion to ₹310 billion, mainly due to scope changes and the construction of a 1.2mt CRM complex and a 0.5mt plate mill facility at Angul.
The ongoing JSP capacity expansion is projected to raise the proportion of flat steel products to over 55%, particularly emphasizing high-margin Value-Added Products (VAPs). With the current focus on VAPs at around 65%, JSP has enhanced its product range, boosting overall realizations. As the additional capacity becomes operational, JSP aims to further develop VAPs, leading to increased margins.
The brokerage expects robust steel demand in India due to increased construction, infrastructure projects, and higher demand for automobiles, real estate, and consumer goods. Strong steel demand in the fourth quarter is anticipated to benefit JSP, leading to improved margins. So Motilal Oswal has recommended a buy target price of ₹900, based on a 6x FY26E EV/EBITDA valuation.
Written by Omkar Chitnis
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