Jindal Steel and Power stock hits 52-week high amid a falling market, here's why

Shares of Jindal Steel and Power Ltd (JSPL) hit a fresh 52-week high amid a market selloff today. The large cap stock rose 0.86 per cent to Rs 566.10 against the previous close of Rs 561.25 on BSE. Market cap of the firm stood at Rs 56,533 crore. JSPL share has gained 46.3 per cent since the beginning of this year and risen 42 per cent in one year.

Jindal Steel stock is trading higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

A total of 1.29 lakh shares of the firm changed hands, amounting to a turnover of Rs 7.21 crore.

Market cap of the firm rose to Rs 56,604 crore on the BSE. The stock hit a 52-week low of Rs 340.10 on November 29, 2021.

Last week, JSPL won three out of the five coal blocks auctioned in four states under the fourth tranche of the commercial auction by the central government.

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JSPL won the bids for Utkal B1 and B2 coal blocks in Odisha. JSPL also bagged the bids for Gare Palma IV/6 coal block in Chhattisgarh, which turned sentiment positive around the stock.

Post the coal block auction, Centrum Broking gave a buy call on Jindal Steel & Power with a target price of Rs 674 compared to the then market price of Rs 552.

"JSPL's winning of coal blocks is a long term positive for the company. This not only provides assured supply but is also financially remunerative," said Centrum Broking.  

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Though the brokerage has not included the benefits of captive coal yet (will do so with progress happening in next two quarters), calculation implies that this can positively affect the fair value by Rs 143 per share at peak capacity.

The brokerage reiterated its positive view on JSPL with a target price of Rs 674 (earlier Rs659), rolling over to FY24 numbers. Its target price is based on 5.5x FY24E EV/EBITDA (Enterprise Value to earnings before interest, taxes, depreciation, and amortisation).

On the JSPL stock hitting fresh yearly high, Pavitraa Shetty, co-founder & trainer, Tips2Trades said, "Recent winning of coal blocks coupled with rising commodity prices have led to metal stocks' current rally especially Jindal Steel which is at a one-year high. Technically,  Rs 555-Rs 560 are good levels for long-term investors to book partial profits. Fresh buying should be initiated only near Rs 456- Rs 460 levels for newer highs of Rs 628 in the coming months."

Motilal Oswal has raised its target price to Rs 605.

"Captive coking coal supplies will partly offset the impact of rising coal prices. We believe the captive coal mines will likely deliver savings of $118m in FY23 (assuming average HCC for FY23 at $400/tonne, current market price at ISD 625/tonne). We have raised our target price to Rs 605 (from Rs 533) driven by an EBITDA uplift of 7/35 per cent for FY23E/FY24E, factoring in savings from captive coking coal from Australia and Mozambique. Australian mines have recently started production and the benefits will accrue to JSPL at the right time when coking coal prices are at the peak. JSPL is likely to achieve 50 per cent captive production for coking coal that will result in savings at a consolidated level," Motilal Oswal said.

Meanwhile, Sensex was trading 448 points lower at 59,161 and Nifty fell 114 points to 17,693 in the afternoon session.