Buy Jindal Stainless (Hisar); target of Rs 159: Emkay Global Financial

Emkay Global Financial's report on Jindal Stainless (Hisar)

With the merger with JSL likely, we expect value unlocking for JSHL minority shareholders. Outstanding ICD (incl. unpaid interest of Rs2.07bn) at Rs11.07bn and the value of 32.02% stake in JSL (on FD basis) at Rs9.8bn together is c.68% of M.Cap of JSL (on FD basis). With the subsidiaries’ business recovering to beyond pre-Covid-19 levels, we believe that the valuation of JSHL is very attractive and could be unlocked as soon as the contours of the business reorganization are released by management. Operationally, the results are better than our estimates with all-round beat on dispatches and EBITDA, especially subsidiary performance. Improvement in product mix also contributed to higher EBITDA. Net debt increased marginally due to higher W/Cap though.

Outlook

We now factor in better profitability from subsidiaries given the turnaround in the current quarter to pre-Covid-19 levels. Ex-JSL stake at a 30% HoldCo discount, JSHL is trading at 3.3x our FY22E EBITDA. Ex-ICD to JSL, JSHL is trading at 2.3x our FY22 estimate. Maintain Buy with an OW stance in EAP.