Jindal Stainless Gets Motilal Oswal's 'Buy' Initiation On Sustainable Growth Prospects, Sees 26% Upside

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Motilal Oswal Report

Following the merger, Jindal Stainless Ltd. clocked a 6% revenue compound annual growth rate, primarily driven by a 12% volume CAGR, partially offset by net sales realisation moderation. Ebitda recorded a compounded decline of 3% during FY22-25 due to weak NSR and a surge in input prices.

Going forward, we estimate Jindal Stainless to post a 10% CAGR in volumes and a 4% CAGR in NSR, driving revenue growth at a similar rate of 14% CAGR over FY25-27. New capacity additions will support upstream production and cater to rising demand.

Jindal Stainless is also expanding its value added product share via acquisitions (CSPL, JSUL, RSSL, RVPL), which is expected to enhance NSR. We anticipate Ebitda/tonne to range between Rs 20,500 and 22,000, supported by a better cost structure and a higher share of VAP with an improved mix.

Jindal Stainless has deleveraged its balance sheet from the peak of Rs 103 billion during FY16 to Rs 40 billion as of FY25, resulting in a net Debt/Equity ratio of 0.2x. RoE, which had reduced to 15% in FY25 (vs 18% in FY23), is likely to remain stable at 16% in FY27.

Considering the strong focus on capacity expansion, raw material integration, enhanced VAPs share, and tight balance sheet control, we initiate coverage on Jindal Stainless with a Buy recommendation. We value the company at 10x on FY27E EV/Ebitda, arriving at a target price of Rs 770 per share.

Key Risks: Nickel price volatility, rise in imports, and domestic demand slowdown.

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