Jindal Steel & Power Ltd (JSPL)

is setting itself up for significant growth with an ambitious capacity expansion plan at its Angul facility in Odisha. The expansion, expected to be completed by Q1 FY27, will increase the company's crude steel capacity by 65 percent to 15.9 million tons per annum (mtpa) and finished steel capacity by 83 percent to 13.75 mtpa, positioning JSPL as the fourth-largest steel producer in India. According to a recent report by Motilal Oswal (https://www.moneycontrol.com/india/stockpricequote/finance-general/motilaloswalfinancialservices/MOF01) , this move is seen as a key driver of JSPL's future growth.

With a capex plan of Rs 31,000 crore, JSPL is allocating 75 percent of its funds towards the Angul expansion, with additional investments in its captive power plants and new projects like micro-pelletisation. Post-expansion, the share of flat steel products is expected to rise to 55 percent, a significant increase from the current 30-35 percent.

Motilal Oswal has reiterated its 'Buy' rating on JSPL with a target price of Rs 1,200 and expects JSPL's capacity expansion and cost-optimisation strategies to deliver long-term value. JSPL's shares closed nearly one percent higher in the previous session at Rs 1,038. The stock has gained nearly 40 percent on a year-to-date (YTD) basis, outperforming the Nifty 50 which gained 18 percent during the same period.

JSPL aims to boost its operating margin by enhancing raw material integration, increasing its captive power plant share, shifting to a higher flat steel mix (approximately 55 percent), and expanding its value-added products (VAP), which currently make up 67 percent of its portfolio. In addition, JSPL has started coal production at the Gare Palma IV/6 mine, with further developments in its Utkal C, B1, and B2 mines expected to contribute to cost-effectiveness and higher margins.

Motilal Oswal Financial Services; target of Rs 703: ICICI Securities
Motilal Oswal's report highlights the strength of the Indian steel market, with demand driven by infrastructure projects, increased construction activity, and rising demand for automobiles, renewable energy, and consumer goods. As a result, JSPL is projected to grow its steel volumes by 18 percent YoY in FY25 to 9 million tons and by 25 percent YoY in FY26 to 11 million tons.

Despite a recent correction in metal prices—long steel down 5 percent and flat steel down 10 percent in Q2 FY25—the outlook remains optimistic. While global steel prices have been impacted by sluggish demand and oversupply from China, Motilal Oswal notes that "prices have bottomed out and recent measures by China to boost its economy would positively impact the domestic steel prices going forward."

JSPL has also significantly reduced its net debt from Rs 39,100 crore in FY19 to around Rs 10,400 crore in Q1 FY25.

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Published-October 01, 2024 / 07:50 IST