Metal Buzz: Not Tata Steel Or Vedanta, But This Jindal Group Stock Is Seen To Rise 17% Ahead, Target Rs 1,128

Amidst Q1 results, one metal giant has reported strong growth pipeline backed by captive coal which further tapped its first quarterly earnings for FY25. Following the robust growth, this largecap metal stock is recommended to buy. Who is it? Neither Tata Steel or Vedanta, top two metal players. But instead, OP Jindal Group-backed Jindal Steel & Power. There is a potential of nearly 17% upside in the short term.

As per JM Financial, JSP reported 1Q consol. EBITDA of INR28bn, significantly higher than JMfe of INR25bn driven by strong volume delivery ~2mn ton + and higher captive thermal coal integration during the quarter.

Key takeaways from the call - a) NSR drop of 1% witnessed going into 2QFY25 2) Iron ore price drop of INR500- INR1,000/t observed in recent auctions 3) Coking coal cost drop of USD30-35/t likely in 2Q 4) Utkal B1 to commence operations soon, while Utkal C expansion to be completed shortly. 5) The company intends to abide by 1.5x net debt/ EBITDA overall. JSP's Net debt stood at INR105bn as on 30th Jun'24 vs. INR112bn as on 31st Mar'24, as per the brokerage.

It added, "Net debt to EBITDA stood at 1.0x as on 30th Jun'24 vs 1.10x on 31st Mar'24. Balance sheet continues to strengthen while supporting the on-going capex. The total capex for the quarter was INR28bn largely driven by the expansion projects in India - time over run observed in certain modules of the 6mtpa expansion."

Further, JM's note said, with a strong balance sheet to support growth capex, increasing raw material security and strong volume growth pipeline, JSP remains well positioned to withstand cyclical challenges - subject to execution risk. Re-iterate BUY. The target price is of Rs 1,128.