Jindal Stainless doubles investors’ wealth in 6 months; What’s next for the stock?

In December, this stock had given a stupendous return of 37.68 per cent. Recently on January 2, it reached the highest level ever. 255.

At current levels, the stock is trading 155.44 per cent above its 52-week low. 95.

Jindal Stainless is a small-cap stock with a market capitalization of 12,769.5 crores. The company is one of the leading manufacturers of Stainless Steel (SS) in India with integrated melting products with a capacity of 1.1 million tonnes per annum (MTPA).

The company is also merging with its sister company, Jindal Stainless (Hisar) Ltd, which operates 800 kt capacity. Therefore, at present the combined capacity has a production capacity of 1.9 MTPA.

Jindal Stainless partnered with Renew Power on 5 December to develop its proposed 300 MW hybrid power project. The project will generate 700 million units of green energy annually through a combination of solar and wind technologies, the company said in a statement.

brokerage firm Phillip Capital, In its latest equity research report, initiated coverage on the stock with “Buy” rating and target price 300 per share, indicating a potential upside of 25.36 per cent from the previous closing price of the stock.

“Stainless steel (SS) is the fastest growing value-added metal globally, aided by new-age applications, growing awareness and strong replacement demand. SS demand has outpaced other metals (+5.7%) in the last decade. ) has outperformed meaningfully. Aluminum is a close second at 3.8%.”

“We expect SS to continue to outperform other metals in the near future as well due to its diverse uses in many important applications, its superior tensile strength and the exploration of new applications. This augurs well for JSL’s long-term growth plans. Dalali said.

Furthermore, Phillip Capital pointed out that India’s low per capita consumption aids rapid market growth. At current levels, India’s per capita SS (stainless steel) consumption is 2.5/kg, which is among the lowest in the world compared to the global average of 6.6 kg, while the country is one of the fastest growing economies.

A major reason for this low consumption is that until a few years ago, most of the demand was for utensils and consumer products, while new-age applications lagged far behind.

However, in the last decade, SS has found its niche in several new applications such as ART (automobile, railways and transport) and ABC (architecture, building and construction), which the brokerage expects will be the main drivers of incremental growth. further.

Meanwhile, the company is in the process of expanding its steel smelting capacity at its Odisha site from 1.1 MTPA to 2.1 MTPA by Q4FY23. This is a growth of 91 per cent at JSL levels and 53 per cent at group level, which ensures a CAGR of 15-20 per cent for the next two to three years, the brokerage said.

JSL, along with its subsidiary, JHSL, currently holds around 50 per cent market share, and given the fact that it has increased its capabilities, which allows it to grow faster than the growth of the market, “We continue to feel that the company will be able to make further improvements in its market share”, said Phillip Capital.

JSL has been steadily reducing its debt for the last 4-5 years and has been able to come out of the CDR (Corporate Debt Restructuring) scheme in FY 20-21.

The company is expected to report a CAGR of 14 per cent over FY22-FY25e. Higher volumes, economies of scale, synergy benefits and better value addition will drive cash flows, which will meaningfully reduce debt over the next few years.

The brokerage said at CMP, the stock trades at 4.5x/3.2x FY24/FY25 EV/EBITDA on a consolidated financials basis of the merged entity (JSL + JHSL + JUSL).

An average of eight analysts polled by Mintjini have a ‘buy’ call on the stock.

disclaimer, The views and recommendations expressed above are those of the individual analysts or broking companies and not those of Mintzeny.

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