ICICI Securities in its research report dated July 12, 2022, has upgraded the shares of Jindal Stainless Limited (JSL) from ‘hold’ to ‘buy’. Further, it has given a target price of ₹ 200 apiece on the share, implying an 83.07% upside as compared to the current market price of ₹ 109.25.
Jindal stainless steel is one of the leading stainless steel manufacturing companies in the world and it is India’s largest stainless steel manufacturer. It operates an integrated steel plant in Jajpur, Odisha. The plant has a total stainless steel capacity of 1.1 million tonnes per annum. Moreover, it has a readily leverageable infrastructure for cost-efficient brownfield expansion.
The company is looking at a ₹650 crore Capex as it plans to ramp up its value-added and speciality product-making capacities. Further, it is exploring investment opportunities in the renewables segment.
“We have successfully commissioned a 26,000 TPA capacity in the first phase of this expansion in Q3FY22, taking the current total capacity to 48,000 TPA. This will strengthen our presence in segments such as auto, process industry, and oil & petrochemicals,” said Abhyuday Jindal, Managing Director, Jindal Stainless Limited.
He added that it will also catalyse their offerings to niche segments like aerospace and electric vehicles.
Investment Rationale
The takeaways from the management’s meeting include:
- Exports can be maintained at 16,000tpm (down from the peak run-rate of 30,000tpm) despite the export duty of 15%. This is on account of higher margins in the US.
- It is reconsidering a blast furnace in JUSL, an associated entity.
- To leverage or hold on to the environmental benefits of running a secondary steel operation and investor feedback has played its part in our view
- It is considering a merger of JUSL into JSL in order to avoid the recurring need for approvals in AGMS and related party transactions.
The small-cap company has a market capitalization of ₹ 5,570 crores and was incorporated in 1980. Some of its key products or revenue streams include steel, job work, sale of services, export incentives and other operating revenue.
The company reported a consolidated total income of ₹ 6582.84 crores, in the March quarter, up 15.85% as compared to ₹ 5682.37 crores from the previous quarter and up 67.66% from the corresponding quarter last year. The company is yet to release its results for the June quarter.
Written By: Simran Bafna
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