Motilal Oswal's research report on Jindal Steel and Power
Jindal Steel and Power (JSPL) has initiated a comprehensive capex plan for its Angul facility to expand its crude steel capacity by 65% to 15.9mtpa and finished steel capacity by 83% to 13.75mtpa. This expansion is expected to be complete by 1QFY27 and will position JSPL as the fourth-largest steel producer in India. Considering the capacity expansion, we estimate a ~17% CAGR in volume for JSPL over FY25-27E. JSPL is taking cost-effective measures to boost its operating margin, such as 1) strengthening raw material integration, 2) increasing its captive power plant share, 3) increasing the flat steel mix to ~70%, and 4) focusing on VAP (current share ~66%). Further, JSPL has started ramping up the Gare Palma IV/6 and Utkal block C, while Utkal C and B1 & B2 will be coming on stream soon, resulting in RM integration and cost effectiveness. Beyond the Angul expansion, JSPL plans an additional capex of INR160b over FY26-28 to enhance VAP (INR57b), strengthen logistics and supply chain (INR45b), and ensure operational sustainability (INR57b).
Outlook
At CMP, the stock trades at 6.2x EV/EBITDA and 1.6x P/B on FY27 estimate. We maintain our BUY rating on JSPL with a TP of INR1,100, based on 7x EV/EBITDA on FY27 estimate.
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