Kotak reiterates ‘buy’ on JSPL; here’s why

Kotak continues to remain positive on Jindal Steel and Power (JSPL) with a buy rating and has upped the target price to Rs 700 from Rs 565 earlier.

The key factor they have highlighted is that the company has won some coal blocks in the recently conducted auctions and Kotak view this positively because at peak levels it could generate around 15 million tonne and save close to Rs 1,500 per tonne. It also makes JSPL self-sufficient with regard to thermal coal.

Kotak also highlighted that the company is poised to deliver strong margins despite cost pressures and two factors they highlight here are - currently, JSPL’s sales mix is more towards longs and Kotak expects long prices to outperform flats, as seen so far this year. The second factor is that JSPL’s dependence on coking coal is relatively low and that could benefit because they get coking coal requirements, some part of that, from their overseas assets and also some part of their production is dependent on thermal coal.