The brokerage has projected the stock to touch ₹1,088 by FY27, implying a compounded annual growth rate of around 26%. It has also upgraded the rating on Jindal Steel to a ‘buy’ from ‘reduce’ earlier. The stock rose 5.7% to ₹575.35 on Monday.
Kotak Institutional Equities compared Jindal Steel with its listed peers Tata Steel, JSW Steel and state-owned SAIL on 10 parameters including volume growth, leverage, revenue growth, operating profit growth and backward and forward integration, and found the company best placed overall.
Accordingly, Jindal Steel is Kotak Equities’ ‘top pick’ in the sector, and it has raised the target price for its shares by 28% to ₹740 by March 2024.
The company announced the expansion and cost-saving projects worth ₹24,000 crore in May 2021.
“We expect all the ongoing steel expansion, cost-saving projects and coal mines would ramp up and operate close to optimal capacity by FY2027E,” Kotak Equities said. It projects the company’s balance sheet to be debt-free by this period and an operating profit of ₹14,105 per tonne.
The company’s backward and forward integration initiatives – four captive coal mines, along with the pellet plant, slurry pipeline and hot strip mill – are expected to improve its operating profit by ₹4,000 per tonne, Kotak Equities said.”We believe JSP has the potential to elevate its product profile closer to JSW-Tata and could announce further downstream capex,” it said.
It estimates the company’s capital expenditure to be around ₹27,000 crore between FY26 and expects internal accruals to keep the net debt to operating profit below 1, peaking out at 0.8 times in FY25.
Shares of Jindal Steel and Power have surged more than 74% over a one-year period, outperforming the 25-39% gains in shares of Tata Steel, JSW Steel and SAIL. The Nifty Metal index has gained 31% over the same period.
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