JSPL Share Price: Analysts warn of multiple downside risks post Q2; Stock falls most in 2023

An analyst with one of the highest price targets on the street for Jindal Steel and Power Ltd., (JSPL) now has one of the lowest target post a downgrade.

JSPL shares fell as much as 7% on Wednesday after analysts warned of multiple downside risks to the stock post its September quarter results. Some of the risks include China steel prices not moving higher, flat spreads, rising capex and plant delays along with continued margin pressure.

Brokerage Firm Citi, which had the third-highest price target on JSPL, downgraded the stock to "sell" from its earlier rating of "buy." It also cut its price target sharply to ₹560 from ₹810 earlier. This is the third-lowest price target for the stock.

Citi's revised price target implies a potential downside of 11% compared to its earlier projected upside of 27%.

The brokerage said that Indian steel prices could have a downside risk if Chinese prices do not move up as premium to import parity is currently over 10%.

JSPL also mentioned that the Angul expansion will see further delays and Citi said that growth from new projects will not play out until financial year 2026.

For the September quarter, JSPL's standalone EBITDA per tonne stood at ₹11,164, which was lower than the estimate of ₹12,150. The company's planned capex through financial year 2027 has now increased to ₹31,000 crore from ₹24,000 crore earlier due to a weak rupee, scope change, and new projects.

CLSA also has an underperform rating on JSPL with a price target of ₹720. The brokerage said that spreads can remain flat despite an increase in realisations for the company.

Another analyst with a bearish stance on the stock is Morgan Stanley, which has the second-lowest price target for JSPL on the street. Its underweight rating comes with a price target of ₹500. Given the rise in raw material prices, Morgan Stanley expects JSPL's margin to remain under pressure in the December quarter as well.

Out of the 26 analysts that track JSPL, 16 continue to maintain a "buy" rating on the stock, four say "hold," while six of them have a "sell" recommendation.

Shares of JSPL are down 7.3% at ₹587.4. This is the biggest single-day drop seen by the stock in 2023.