Buy Jindal Steel: target of Rs 1225: ICICI Securities

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Volume growth: Jindal Steel targets FY27 steel production of 11.0-11.5mnt, with H2 production expected to be stronger, driven by seasonal demand and improved capacity utilization.
  • Margin expansion: The company expects EBITDA/t to improve in H2FY27, aided by higher capacity utilization, a favorable product mix, and cost-saving initiatives.
  • Cost savings: The commissioning of the 192km Barbil–Angul slurry pipeline is expected to generate freight savings of ~INR 700/t, while increasing captive coal and iron ore availability could strengthen cost competitiveness.
  • Operational leverage: Continued use of coal gasification at downstream facilities provides a structural fuel-cost advantage.

Thesis Validation Checklist

  • Volume growth: Monitor monthly sales volumes, particularly in H2FY27, to assess the company's ability to meet its production targets.
  • Margin expansion: Track EBITDA/t and operating margins to evaluate the effectiveness of cost-saving initiatives and the favorable product mix.
  • Cost savings: Monitor the progress of the slurry pipeline and captive coal and iron ore production to assess their impact on costs.
  • Operational leverage: Watch for any updates on the commissioning of new facilities, such as the second 2mnt DRI plant and additional coal gasifiers, to gauge their contribution to operational efficiency.