The capacity expansion plans of Jindal Steel & Power Ltd are likely to receive a boost with the commissioning of a slew of projects over the next couple of quarters, including BF-II, BOF-II, ACPP-II, and a slurry pipeline, Antique Stock Broking said in a note. It noted that higher volumes from BF-II and product mix improvement through the ramp up of the 6 mtpa HSM and CRM complex commissioning would support topline growth.
On the other hand, the ramp up of currently operational coal mines and commencement of Utkal block B1 and B2, slurry pipeline and ACPPII commissioning are seen lowering coal costs and aid margins.
"We favor the prudent leverage levels and growth outlook. We maintain BUY rating on JSPL and our target price of Rs 1,183 is based on a multiple of 6.5 times FY27 EV/Ebitda," Antique Stock Broking said.
The stock closed at Rs 908 level on Friday. The Antique's target price suggests 30.28 per cent upside over this price.
The brokerage noted that volume growth for JSPL has been constrained by the availability of metallic, which would be resolved by the 3.3 mtpa Angul crude steel expansion and BOF-II commissioning.
The 6 mtpa hot strip mill is currently operating at 40 per cent utilisation level and would improve with the blast furnace commissioning. The CRM complex coming on stream would further aid in product mix improvement, Antique said.
"Higher capacity utilisation at the iron ore pellet plant would drive improved DRI utilisation contributing to the additional volume growth as well," it said.
JSPL has a significantly higher proportion of value-added products, at 53 per cent currently, in the mix. This includes high tensile, heat-treated plates & coils, rails, high tensile structures & TMT, alloy wire rods, fabricated structures. They insulate the company from steel price volatility, Antique Stock Broking said.
At present, the company has four thermal coal blocks in India. The current rated capacity of the four mines is 15.4 mtpa. Lower coal costs due to a further ramp up at Gare Palma IV/6 and Utkal block C to 9.7 mtpa level and commencement of Utkal block B1, would support margins.
"3QFY25 coking coal costs are expected to decline by $20–25 per ton sequentially, however, the benefits could be partially offset by higher iron ore costs. JSPL has an advantage in hot metal configuration compared to peers providing flexibility," Antique said.