Kotak Institutional Equities has reportedly upgraded the Jindal Steel and Power shares from ‘reduce’ to ‘buy’ while raising its fair value from Rs 580 to Rs 740.
As per the brokerage firm, a sector-leading growth profile coupled with the robust balance sheet is making a strong case for the re-rating.
Apparently, on the BSE, the stock opened 5.8% higher at Rs 576.55.
Kotak compared the four enlisted integrated steel companies on the basis of 10 metrics, spanning operational and financial parameters, subsequently finding Jindal Steel and Power as the best-placed among its peers.
Kotak Institutional Equities, on witnessing Jindal Steel and Power with the best risk-reward ratio amongst peers in its coverage, claimed that the company is seeing a potential 100% return in three years in March 2027 (earnings) basis.
In the following three and five years, the brokerage firm projects that EBITDA will expand by a compound annual growth rate of 19 and 17%, respectively, and that EPS will grow by 33 and 27%.
The expansion projects for the company, which were announced in May 2021 and have an estimated cost of Rs 24,000 crore, would progressively be put into operation starting in October 2023, helping to boost profitability in the second half of FY24. Volumes and an upgrade in the product mix will benefit from these expansion projects, which include capacity growth, backward integration, and forward integration.
When operating at full capacity, the ongoing expansion projects of Jindal Steel and Power will enhance forward-backward integration and perhaps increase profits by about Rs 4,000 per tonne.
In FY24–26, the brokerage firm projects capital expenditures of Rs 27,000 crore, which is Rs 6,000–7,000 crore more than the company's previously disclosed capex forecast. It believes that starting in the second half of FY24, the ongoing expansion initiatives will begin to contribute.
Source Credits: https://www.moneycontrol.com/news/business/markets/kotak-upgrades-jindal-steel-power-to-buy-hikes-target-price-by-28-10817341.html
