Jindal Stainless Ltd. shares are likely to be in focus after Goldman Sachs initiated coverage on the stock with a 'Buy' rating and a target price of Rs 1,000, implying an upside of nearly 35% from the current market price of around Rs 742.
The global brokerage believes Jindal Stainless is well positioned to benefit from India's structural growth in stainless steel consumption, supported by rising urbanisation, infrastructure spending and increasing use of stainless steel across sectors such as construction, automobiles, railways and transportation.
Goldman Sachs described Jindal Stainless as a major beneficiary of rising domestic consumption, highlighting that the company is India's largest stainless steel producer and one of the world's leading manufacturers. It believes the stock's investment case rests on four key pillars: strong exposure to India's stainless steel demand, a rising share of value-added products, significant capacity expansion potential and attractive valuations.
A key positive, according to the brokerage, is the company's balance sheet, which it believes provides sufficient headroom to double installed capacity from the current 4.2 million tonnes over the medium term without materially stretching leverage.
Goldman noted that the planned 4 million tonne Maharashtra expansion is expected to be funded from a much stronger financial position than previous expansion cycles, with leverage likely to remain below 0.7 times net debt-to-EBITDA during the capex phase.
The brokerage also expects profitability to improve as the company increases the share of higher-margin, value-added stainless steel products in its sales mix. In addition, Jindal Stainless is likely to benefit from contributions from its Indonesian joint venture with Tsingshan Group, which provides recurring earnings and strengthens its global raw material integration.
Goldman Sachs expects India's stainless steel consumption to grow at around 8% CAGR between FY24 and FY35, significantly outpacing global demand growth. With India's per capita stainless steel consumption at 3.3 kg, well below the global average of 5.5 kg, the brokerage sees ample room for demand expansion over the coming decade.
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