Jindal Stainless share price: Stainless steel manufacturer Jindal Stainless shares soared as much as 4.10 per cent to an intraday high of Rs 632.55 on Tuesday, January 14, 2025.
However, at 1:00 PM, Jindal Stainless shares were off day’s highs, and were trading 3.23 per cent higher at Rs 627.25. In comparison, BSE Sensex was trading 0.39 per cent higher at 76,625.82 levels.
The rally in Jindal Stainless shares followed an upgrade by Nuvama Institutional Equities (Nuvama), which raised its rating on the stock to ‘Buy’ from ‘Hold’ and set a revised target price of Rs 836 (Rs 756 earlier). The target reflects an upside potential of 37.59 per cent from previous session’s close of Rs 607.60.
“We are cutting FY25E/26E Ebitda by 7 per cent each to factor in lower volume and profitability amid temporarily weak export demand that is likely to pick up in FY26. We rollover to FY27, valuing the stock at 8.5x FY27E EV/Ebitda and arrive at a target price (TP) of Rs 836 (earlier Rs 756). After being sideways for a year, we upgrade the stock to ‘Buy’ from ‘Hold’,” said Ashish Kejriwal and Kunal Kothari of Nuvama, in a note.
The share price of Jindal Stainless (JSL) plunged around 20 per cent last month amid weaker-than-expected volume, profitability and general weakness in the market, Nuvama said.
Also Read
Analysts, however, believe that earnings likely bottomed out in Q3FY25. They further highlighted that the company’s long-term structural potential remains robust, suggesting that the recent dip presents a strong buying opportunity.
Given this, here are the top factors behind the upgrade:
Volume growth set to improve in H2FY25; export recovery expected by FY26.
During H1FY25, JSL achieved a 5 per cent Y-o-Y growth in volume to 1.14mt. While domestic volumes rose 11 per cent Y-o-Y to 1.03mt, export sales plummeted 30 per cent Y-o-Y to 114kt due to high freight costs and weak demand in key markets like Europe and the US.
Recovery in freight rates and US infrastructure investments, analysts believe, are expected to boost export demand in FY26. Domestically, JSL is poised for ~16 per cent Y-o-Y growth in H2FY25.
“We are pruning FY25E/26E volume growth by 5 per cent/4 per cent to 2.34mt (up 7.7 per cent Y-o-Y)/2.7mt (up 15 per cent Y-o-Y). We are factoring in volume of 3.28mt in FY27 (up 21.5 per cent Y-o-Y) to factor in a global demand recovery and volume coming from new capacity (1.2mtpa), which shall be commissioned in H1FY27,” Nuvama said in its note.
Ebitda margins to stabilise amid challenges
Export weakness and increased domestic supply impacted H1FY25 profitability, with Ebitda/tonne recorded at about Rs 17,600. This is expected to range between Rs 17,000-17,500 in H2FY25 before rising to approximately Rs 18,000 in FY26 and about Rs 19,000 in FY27, driven by improved volumes, a better product mix, and export market recovery.
Strategic capex to boost RoCE
Jindal Stainless is investing about Rs 5,700 crore bn in growth capex over FY25–27E, targeting upstream and downstream capacity expansions.
Key projects include a 1.2mtpa SMS expansion in its Indonesia JV and 1.1mtpa/0.17mtpa HRAP/CRAP expansions at Jajpur, all set to be operational by H1FY27, with a projected pre-tax RoCE of approximately 45 per cent.
Although acquired assets (Chromeni, Rathi Steel, RVPL) offer lower RoCE initially, full utilisation and further expansion, analysts opined, could improve returns. The company’s RoCE is projected to rise from 19 per cent in FY25 to around 25 per cent by FY27, with a net cash position of about Rs 290 crore, assuming the planned capex is executed as announced.