Buy This Multibagger Metal Stock For A Target Price of Rs. 488 In 12 Months

Jindal Stainless Hisar Ltd (JSHL) is a small cap firm that produces stainless steel with a market valuation of Rs 9,100.00 Cr. JSHL is a stainless steel integrated unit with an annual melting capacity of 8,00,000 tonnes. JSHL is one of the world's largest manufacturers of stainless steel strips for razor blades and India's largest producer of coin blanks. The stock has risen from Rs 119.75 as of February 17, 2021 to Rs 380.20 as of February 16, 3:30 pm IST, giving a multibagger return of 217.49 percent in the last year. On a year-to-date (YTD) basis, the stock has gained 4.04 percent, 30.88 percent in the last six months, and +7.35 (1.97 percent) today on the NSE. Following the company's strong Q3FY22 performance, brokerage firm ICICI Securities has given the stock a buy rating with a target price of Rs 488 and a 12-month target period.

Q3FY22 results of JSHL as per the brokerage

• JSHL reported a healthy performance in Q3FY22.
• During Q3FY22, JSHL reported a consolidated topline of Rs 4173 crore, up 33% YoY and 11% QoQ, higher than our estimate of Rs 3696 crore.
• Consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) were at Rs 569 crore, up 47% YoY and flattish QoQ, higher than our estimate of Rs 558 crore. Consolidated profit after tax (PAT) was at Rs 515 crore, up 91% YoY and 3% QoQ, higher than our estimate of Rs 482 crore.

Key investment rationale for JSHL according to ICICI Securities

• With respect to the precision strip division, JSHL has recently commissioned the first phase of expansion wherein the precision strip capacity has been expanded from 22000 tonnes per annum (TPA) to 48000 TPA. Going forward after the second phase, precision strip capacity would be further expanded to 60000 TPA (from 48000 TPA) which would be completed by Q4FY23. The total CAPEX for both phases is Rs 250 crore.
• JSHL is also expanding blade steel capacity from current capacity of 14000 TPA to 24000 TPA in two phases at a total capex of Rs 200 crore for both phases. After the first phase, the capacity would be expanded to 20000 TPA and is likely to be completed by Q2FY23 while post the second phase capacity would be expanded to 24000 TPA and be completed by Q2FY24.
• The company has indicated that FY22E EBITDA/tonne would be in a range similar to that reported during 9MFY22 (JSHL standalone entity's 9MFY22 EBITDA/tonne was Rs 26811/tonne).

Buy for a target price of Rs 488

ICICI Securities has claimed that "JSHL's share price has given a return of ~171% over the last 12 months (from ~Rs 125 in February 2021 to ~Rs 395 levels in February 2022). We maintain our BUY rating on the stock. We value JSHL at Rs 488, based on merger ratio."

As an alternative stock from the metal sector, the brokerage is also bullish on Jindal Stainless Ltd (JSL). As per ICICI Securities "JSL has a 1.1 million tonnes per annum (MTPA) integrated facility with backward integration (ferro chrome and captive power plant). BUY with a target price of Rs 250."

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.