Motilal Oswal upgrades JSPL on lesser debt hopes, biz turnaround

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26 Aug, 2025 12:21

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Motilal Oswal is placing a huge bet on Jindal Steel and Power, riding on better debt servicing capabilities, and hope of a sharp turnaround due to its new furnace capacity addition. It has upgraded its recommendation to buy and has doubled the target price of Rs 180 from Rs 88.The stock has seen sharp upward movements, posting a rise of nearly 77 percent since January 2017.  The company is in advanced stages of commissioning a new 3 MTPA furnace, which is set to boost its total steelmaking capacity in the country to 8 MTPA. The brokerage house feels that the new blast furnace “would correct hot metal mix, reduce operating costs and leverage existing infrastructure to drive turnaround of its Angul plant. The new site can also accommodate much larger 12 MTPA capacity, which implies that new capacity addition will require low specific capex, shorter execution cycle and deliver superior IRR. “The site is strategically located in an oversupplied iron ore region and is close to ports,” the brokerage said in a report. On global debt, the research firm highlighted that global ventures comprises coking coal mines in Australia and Mozambique, thermal coal mine in South Africa and a steel plant in Oman. “Rising coking coal prices have led to a turnaround of mines. With EBITDA run rate of USD 130 million, USD 2 billion debt in global ventures is now serviceable,” the brokerage said in a report. Motilal Oswal sees boost in cash flows to the tune of Rs 4,000 crore on the back of asset sale in 1,000 MW (EUP 1) capacity unit in FY19.On the company’s financials, the brokerage expects standalone sales volume to grow at a CAGR of 31 percent to 5.8 MT and EBITDA to grow at a CAGR of 35% to Rs 5,200 crore over FY17-19. “Our estimate of 4.5 MT for FY18 is conservative relative to JSP’s guidance of 6 MT; we have factored in teething problems during startup of the new furnace,” the brokerage house added.  Motilal Oswal sees a sharp turnaround in cash profits. Yet, adjusted PAT would be negative due to bloated depreciation on massive asset revaluation in first half of this financial year, it said.