Kotak Institutional Equities expects the next 12 months to be a transformational period for Jindal Steel and Power Ltd. (JSPL) and has upgraded the stock to buy from its earlier rating of reduce.
The brokerage sees a 28 percent potential upside for India's third largest private steel producer. It has also upgrded its price target on JSPL to Rs 740 from Rs 580 earlier. The brokerage has also made JSPL as the top pick in India's steel sector.
So why are the next 12 months transformational for JSPL? Multiple projects are lined up for commissioning during this period. These projects will increase the production capacity of the company by 65 percent in two phases. The brokerage believes that while a large part of the capex will be funded by internal accruals, it expects the net-debt-to-EBITDA ratio to peak at 0.8 times by financial year 2025.
On a three year basis as of March 2027, Kotak Institutional Equities expects shares of JSPL to double from the current levels.
JSPL in April had announced that it was planning to commission a 1.2 MTPA Rail & Heavy structure mill at its Angul Steel complex in Odisha. After the commissioning, JSPL’s total rail-making capacity will increase to 2.2 MTPA.
The company also expects to double the capacity of Angul Steel complex by financial year 2025.
JSPL reported gross revenue of Rs 15,480 crore in the March quarter against Rs 15,579 crore a year ago. Its net debt reduced to Rs 6,953 crore as of the March quarter from Rs 7,090 crore in the December quarter. Net debt-to-EBITDA ratio was 0.7 times as of March quarter.
Shares of JSPL are trading 5.25 percent higher at Rs 572.25. The stock is still down by 4 percent on a year-to-date basis.
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