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ICICI Securities in a note said that it visited Jindal Steel and Power’s (JSPL) Angul plant which has evolved and improved a lot since its first visit in CY09. There are eventual plans (and adequate land availability) to take the expand the capacity.
“While management is looking to build up capacity through internal accruals and limiting net debt to 1.5x of EBITDA at all times, the execution is seldom as linear as the plan sounds,” the domestic brokerage and research firm said in a note. ICICI Securities has upgraded the metal stock JSPL to Add from Hold with a target price ₹433 per share.
With the introduction of slurry pipeline, JSPL can save ~ Rs1000/te of steel on transportation cost. Further, with the commissioning of hot strip mill (HSM), management expects to improve the mix and derive an additional EBITDA of Rs5000/te
Another brokerage house PhillipCapital also came out positive from the visit and was surprised with the pace of work visible for the next leg of growth. “This also gives us confidence that value addition projects (pellet/HSM) would come in within a year, which would improve margins,” it said in a note. The brokerage’s bullish stance on JSPL shares comes with a target of ₹570.
“The 6mn-tpa pellet plant is likely to be ready first by September-October 2022 (equipment ordering is done; civil work is progressing well) while the 3mn-tpa HSM may be complete by the end of FY23 (civil work has started). Both the projects will be margin accretive, as JSPL has a mismatch in production and downstream capacities, which the HSM can help correct,” analysts at PhillipCapital added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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