Jindal Steel & Power hits over 6 month high; stock up 23% in two weeks

The stock is trading at its highest level since June 14, 2019

Shares of Jindal Steel & Power (JSPL) gained 4 per cent on the BSE on Monday to hit an over six-month high of Rs 168 on expectation of improved earnings going forward. The stock of the OP Jindal Group company was trading at its highest level since June 14, 2019.

In the past two weeks, JSPL's stock rallied 23 per cent after the company commissioned its fourth coke oven battery at Angul plant making it self-sufficient in coke requirement. In comparison, the S&P BSE Sensex was up 1.5 per cent during the same period.

The next leg of growth at Angul is expected to be driven by recommencement of production at the 1.8mtpa direct reduced iron (DRI) plant (by end-December 2019), which would use the rich gas produced by the coke oven batteries. The fourth unit of the 500ktpa coke oven battery has also been commissioned, which will supply coke to Raigarh, substituting purchased coke.

The company remains focused on debt reduction.  The brokerage firm Motilal Oswal Securities expects JSPL to generate significant consolidated free cash flow (as major capital expenditure is now behind), which will help reduce leverage – Rs 36,500 crore net debt as of September 2019 with around 5 times net debt/ EBITDA.

JSPL is also pursuing overseas asset monetization (including stake sale in Oman), which when successful, would aid further deleveraging, the brokerage firm said, with ‘buy’ rating on the stock with a target price of Rs 184 per share.