Nuvama has hiked its target price for Jindal Steel & Power Ltd., citing that the company's initiative to resolve bottlenecks in its pellet plant operations can accelerate production volumes. Management remains confident that these issues will be addressed by January, with both the ramp-up of existing capacity and the commissioning of new capacity expected to drive significant volume growth.
The brokerage has hiked its target price on the steel manufacturer to Rs 1,292 from Rs 1,139, implying a potential upside of 40%. It has maintained the 'buy' rating on the stock.
Nuvama highlighted that the underutilisation of JSPL's six million tonnes per annum pellet plant — currently operating at just 40% capacity — has been a key hurdle. This has limited the availability of high-grade pellets, restricting optimal operations at the company's 1.8 mtpa gas-based direct reduced iron plant at Angul.
As a result, annual crude steel production has been capped at 7.7–7.9 million tonnes.
Management expects to overcome these bottlenecks by next month, targeting 80% capacity utilisation at the pellet plant by fiscal 2026. This improvement is projected to ramp up crude steel production to 8.3–8.4 million tonnes annually.
Capacity Expansion on Track
The company plans to commission an additional 3.3 mtpa of steel capacity by March, with the blast furnace and basic oxygen furnace expected to become operational by February. This expansion is projected to contribute an incremental two million tonnes of production in fiscal 2026, assuming a 60% capacity utilisation rate.
Combined with ongoing operational improvements, JSPL aims to achieve a 26% compound annual growth rate in volumes over fiscal 2025 to 2027, reaching 12.4 million tonnes by March 2027.
Outlook For March Quarter
Nuvama noted that in quarter ended March 2025, the company is likely to see improved earnings, supported by higher steel prices, increased government capital expenditure, and volume growth.
The brokerage anticipates a potential Rs 2,000 per tonne increase in steel prices during the quarter, driven by a possible safeguard duty of 20–25% on imports. Additionally, lower coking coal prices are expected to boost margins by approximately Rs 600 per tonne quarter-on-quarter.
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