Jindal Stainless Ltd. share price target

Despite relatively stable profitability, Jindal Stainless (JSL) has underperformed its carbon steel players over the past 12 months, primarily due to the concerns on earnings growth.

Jindal Stainless (JSL)’s Q2FY24 performance lagged our estimates marginally, mainly due to lower-than-expected sales volume. Key points: 1) Exports volume was impacted by a subdued global (particularly European) market. 2) Profitability was also impacted by a transient lag between ferrochrome and chrome price movements.

Jindal Stainless’ (JSL) Q1FY24 EBITDA at INR 11.2bn (up 35% YoY) beat our estimate by 9%. Key points: 1) shipments rose 54% YoY to a record level of 548.6kte; 2) EBITDA/te at INR 20,375 was slightly ahead of our estimate; 3) domestic subsidiaries performed well while overseas subsidiaries continued to languish.

Jindal Stainless’ (JSL) Q4FY23 performance was 12% ahead of our and street estimates. Key points: 1) sales volumes were up 14% YoY (8.5% QoQ) to an all-time high of 507.6kte aided by the rolling of third-party stainless steel flats; 2) blended realisation however was down 14% YoY (-3% QoQ) tracking international raw material prices and higher volumes of the 200 series in the domestic market.

Despite tumbling 13% in past one month, the Jindal Stainless (JSL) stock has delivered 112% return in past six months. We believe the stock deserves a fresh look as the fundamentals post-merger remain robust and we see a semblance of regulatory support emerging.

Jindal Stainless’ (JSL) Q3FY23 performance was 22% ahead of our and street estimates. Key points: 1) Sales volumes were up 33% YoY (22% QoQ) to an all- time high of 330.4kte aided by the rolling of third-party stainless steel flats; 2) blended realisation however was down 13% QoQ tracking international raw material prices and higher hollow-ware sales in the domestic market.

We hosted Jindal Stainless’ (JSL) management for a roadshow in Mumbai (on Dec 19, 2022). Key takeaways: 1) Expect volume CAGR of ~20% by FY25; 2) expect FY23 EBITDA margin to sustain at Rs18,000-20,000/te.

We attended the analyst call of Jindal Stainless’ (JSL) to discuss the Q2FY23 performance.

Jindal Stainless’ (JSL) Q2FY23 performance was ahead of street estimates. Sales volumes were up 5% YoY (14% QoQ) to an all-time high of 270.4kte.

Jindal Stainless (JSL) management meeting takeaways include: i) Exports can be maintained at 16,000tpm (down from peak run-rate of 30,000tpm) despite the export duty of 15%, mainly on account of higher margins in the US. ii) Blast furnace capex in JUSL is being reconsidered; leverage, holding on to the environmental benefits of running a secondary steel operation and investor feedback has played its part in our view.

We present a stock idea Jindal Stainless Ltd. (JSL), the gold standard in stainless steel and on the verge of business evolution, with a fair value of Rs260. With its merger with Jindal Stainless Hisar (JSHL), the merged entity will command a towering 55% share, with limited competition. JSL's port and raw material proximity, international finishing capabilities coupled with JSHL's strategically located facility in key domestic consumption centres will drive synergies in the merged entity. The doubling of JSL's steel melt shop capacity and expansion of JSHL's value added Special Product division should be a growth accelerator, with emerging sources of demand such as Auto, railways and infrastructure. JSL's...