Buy Jindal Steel and Power; target of Rs 375: Motilal Oswal
Motilal Oswal is bullish on Jindal Steel and Power recommended buy rating on the stock with a target price of Rs 375 in its research report dated January 04, 2021.
January 14, 2021 / 08:55 PM IST
Motilal Oswal's research report on Jindal Steel and Power
Jindal Power (JPL), a subsidiary of JSP, has been declared the winner of the 6mtpa Gare Palma IV/1 coal block by the Ministry of Coal. This would substitute e-auction coal purchases by JPL, reducing cost by ~INR900/t on volumes of 6mtpa, implying annual savings of INR5.5b. It would increase consolidated EPS by INR4.4/share (14%) and valuation by ~INR27/share (~8%). We expect JPL to be able to operate this block in 6-9 months (i.e. by 3QFY22), which would partly help substitute the operating loss from the exhaustion of Sarda iron ore inventory by 2QFY22.
At the CMP, the stock trades at an attractive 3.5x FY22E EV/EBITDA for the steel business which is a significant discount to peers (Tata Steel and JSW Steel). We value JSP on a SoTP-based TP of INR375/sh, based on 5x FY22E EV/ EBITDA for the Steel business and DCF valuation for the Power business.
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