Buy Jindal Steel of Rs 900: Emkay Global Financial

Emkay Global Financial is bullish on Jindal Steel has recommended buy rating on the stock with a target price of Rs 900 in its research report dated February 12, 2023.

Broker Research

February 16, 2023 / 19:10 IST

26 Aug, 2025 12:21

Volume

Todays L/H

Emkay Global Financial's research report on Jindal Steel

Jindal Steel & Power (JSPL) has embarked on an expansion program spread over FY22- 26 which will not only increase its capacity, from ~9mtpa currently to ~16mtpa, but also improve its cost efficiency (12mtpa pellet plants, slurry pipeline, HSM), at an outlay of ~Rs200bn. Growth capex/ton translates into sub-US$300 vs replacement cost of ~US$800/ton, implying attractive incremental RoCE. Also, the capex can be met entirely from internal accruals which points to no increase in leverage due to this. Jindal Steel & Power (JSPL) has a well-balanced capacity mix between BF and EAF, making it much less vulnerable to coking-coal price volatility. Once fully ramped up, JSPL’s international coking-coal assets will give it a partial, natural hedge. JSPL’s access to captive thermal coal grants it a fairly good competitive advantage over both, domestic and international peers. JSPL’s product mix is skewed towards construction/infrastructure steel which will help the company to capitalize on the Government-of-India’s (GoI) capex thrust. JSPL has significantly de-risked its balance sheet (BS) over the last ~4 years. Based on its current & potential EBITDA, there is scope for JSPL to leverage its BS for growth beyond 16mtpa. Acquisitions at expensive valuations, though, would not be prudent. Over FY23-26, we also forecast EBITDA CAGR of 25% and believe that JSPL will generate ‘Value Add’ of Rs420bn (~70% of current market-cap).

Outlook

Near-term EBITDA/FCF momentum is positive, as Q4FY23 is expected to be strong. We value JSPL using EV/IC multiples that we adjust up or down, based on how much the RoCE is higher or lower than the WACC. We have an EV/IC-based TP of Rs900/share.

For all recommendations report, click here