Motilal Oswal Institutional Equities has placed a "buy" call on the stock of JSW Steel with an 18 per cent upside target.
Valuation and view - Strong project pipeline to drive growth
"We like JSW Steel given its strong project pipeline and cost reduction initiatives. On the domestic front, we expect the company to deliver above-industry volume growth in FY22E, driven by expansion. Margins should also improve, aided by better product mix. Any turnaround in its loss-making overseas operations could provide a further upside," the brokerage firm has stated.
In the near term, Motilal Oswal expects JSW Steel to tide over the disruptions caused by the COVID- 19 pandemic, supported by higher exports, cost reductions, and capex curtailment.
"Although net debt is expected to rise to Rs 677 billion in FY22E (from INR639b in FY20), we expect it to decline subsequently as the capex phase ends and invested projects start generating cash flows. We value JSTL at 7.0x FY22E EV/EBITDA to arrive at TP of Rs 242 pershare. Maintain Buy," Motilal Oswal has stated .