This Multibagger Metal Stock Jumped 51% In 3 Months, Buy For 31% Returns, Says ICICI Securities

ICICI Securities has placed a "buy" call on Jindal Stainless Limited (JSL) with a target price of Rs 270/share. The brokerage has estimated a target price of Rs 270/share for the stock of the company. With the given target price, the brokerage sees a 31% potential upside from its current level if it is purchased today at the current price. Jindal Stainless is the largest stainless steel manufacturer in India. With a market capitalisation of Rs 10,940.82 crore, it is a midcap Metal sector company.

Stock Outlook & Returns on investment

On BSE, the shares of Jindal Stainless trading 1.5% down at Rs 206.85/share. Its 52-week high is Rs 229.15 and its 52 week low is Rs 95.05, respectively. The stock has fallen 3.88% in the past 1 week, whereas, in the past 1 month it surged by 18.48%. In 3 months, it gained 51.06%. In the past 1 year, it gave 14.23% positive returns. In the last 3 years, it gave 438.62% multibagger returns and in the last 5 years, it has given 91.76%, respectively.

Key takeaways

ICICI Securities hosted Jindal Stainless' (JSL) management for a roadshow in Mumbai on Dec 19, 2022. Here are the key takeaways:

I) Volume CAGR (including JSHL) is likely to be ~20% in through FY25 as new 1mnte capacity at Jajpur, Odisha gets commissioned, ii) FY23 EBITDA margin is likely to be Rs18,000-20,000/te; however, we expect an improvement from Q2FY23 levels in H2FY23, iii) management sees an increased application of 400 series (lower nickel content) due to better cost advantages, iv) SMS capacity to be operationalised by FY23-end while ferro chrome plant and blade steel capacity are likely to be commissioned in FY24, v) company is endeavouring to complete the merger with JSHL and acquisition of JUSL by FY23-end. In our view, the company is in a good position to ramp-up volume (due to brownfield capacity being commissioned) and improve profitability (due to JUSL acquisition). Also, a mere Rs7-8bn of planned capex is left which would largely be utilised for pending capex of upstream and downstream lines, ferro chrome plant and blade steel capacity.

Regulatory overhang receding

ICICI Securities said, "We find two recent developments beneficial for stainless steel sector: 1) Removal of export duty to aid value-added exports; 2) imposition of anti-dumping duty on stainless steel seamless tubes and pipe imports from China for five years. In our view, the imposition of anti-dumping duty for the first time after CY18 is an important step. While it is not directly positive for JSL, being in flat products, we believe it signifies the shift in stance of the government towards protectionist measure for stainless steel industry."

Outlook - Volume-led growth in sight

The removal of export duty is likely to redeem JSL's volume and margins. Besides, the commissioning of 1mntepa brownfield capacity may result in volume CAGR of 20% (pro forma basis). "We have raised our volume estimates to 1.4mnte (earlier 1.1mnte) owing to improved prospects in both domestic and export markets. Our revised TP works out to Rs270 on 5.5x FY24E EBITDA," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.