Jindal Stainless - Transient Decline Provides Fresh Opportunity: ICICI Securities

ICICI Securities Report

Despite tumbling 13% in past one month, the Jindal Stainless Ltd.'s stock has delivered 112% return in past six months. We believe the stock deserves a fresh look as the fundamentals post-merger remain robust and we see a semblance of regulatory support emerging. Key points:

1. Jindal Stainless is on track to deliver 2.1 million tonne/2.7 mnte in FY24/FY25 as capacity expansion at Jajpur is complete;

2. Ebitda/tonne is likely to sustain at Rs 20,000 over next two years;

3. recent backward integration initiatives are likely to reduce external vulnerabilities;

4. Directorate General of Trade Remedies has recommended re-imposition of countervailing duty of 18.95% post the sunset review on import of 200 series from China;

5. new applications such as in railways and roads increase the opportunity size.

In our view, Jindal Stainless is at the cusp of profitability/volume improvement largely on the back of commissioning of new capacity (1.0 million tonnes per annum) and favorable regulatory shift.

We the merged entity at six times Ebitda. Furthermore, the acquisition of Jindal United Steel Ltd. is likely to improve margins by ~Rs 4,000/tonnee in our view.

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