'Buy' Jindal Steel Maintains Motilal Oswal, Says Capex Strategy To Drive Long-Term Competitiveness

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Motilal Oswal Report

Jindal Steel and Power Ltd.'s capacity expansion will boost its crude steel capacity by 65% to 15.9 mtpa, which would primarily support revenue growth. The ramp-up of currently operational coal mines, the commencement of Utkal block (C and B1 & B2), slurry pipeline, and ACPPII commissioning would lower coal costs and support margins.

Further, the company’s focus on improving the VAP share (CRM complex + VAP enhancement project) will support NSR.

JSPL has followed a prudent deleveraging policy, which has helped the company strengthen its balance sheet. The company has deleveraged its balance sheet from Rs 464 billion of net debt in FY16 to ~Rs 110 billion as of FY25, translating into a net debt-to-Ebitda ratio of 1.1x.

JSPL aims to maintain it below 1.5x considering the ongoing and proposed capex.

At current market price, the stock trades at 6.2x EV/Ebitda and 1.6x P/B on FY27 estimate. We maintain our Buy rating on JSPL with a target price of Rs 1,100, based on seven times EV/Ebitda on FY27 estimate.

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