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Jindal Stainless (Hisar) - Initiating Coverage - BUY - TP Rs.318 - Kotak

Posted On: 2017-12-21 01:37:37

Jindal Stainless Hisar (JSHL), is a Hisar unit of Jindal Stainless (JSL) which got separated due to Asset Monetization Plan (AMP), in 2015. JSHL has an installed capacity of 0.8MT and the group has captured about 50% market share along with 0.8MT of JSL capacity. JSHL has always been the profitable business even during the turbulent times, due to its focus on value added products. The company is the world's largest SS producer strips for razor blades and India's largest producer of coin blanks, catering to Indian and International mint needs. Going ahead, with the increased focus of the government on improving railway's infrastructure, metro railways, airport, coupled with the growing usage of cookware is likely to support the growth of stainless steel industry in the domestic market. As per the industry estimates, stainless steel (SS) industry is likely to grow at 8% CAGR during FY17-23E. Given the implementation of GST and the imposition of 18.95% CVD on Chinese imports, we expect JSHL to garner a higher market share in the coming years. We expect revenue to grow at a CAGR of 15% during the FY17-FY20E period. In addition, increasing share of Cold Rolled (CR) through debottlenecking in the overall product mix will help the EBITDA to grow at 14% CAGR and margin to improve gradually from 11.9% in FY17 to 12.5% by end of FY20E. Besides these, an improvement in subsidiaries performance is also likely to be a potential growth driver. We expect PAT to grow at 31% CAGR with a return ratio in the range of over 20%. We are initiating coverage on JSHL with BUY rating, valuing it on a SOTP basis, giving core business 7x FY19E EV/EBITDA multiples and investment in JSL (36.6% stake) at 25% holding company discount, thereby arriving at a target price of Rs318. The stock is currently trading at 6x/5.3x/4.8x FY18E/ FY19E/FY20E EV/EBITDA.

Shares of Jindal Stainless (Hisar) Ltd was last trading in BSE at Rs.209 as compared to the previous close of Rs. 209.5. The total number of shares traded during the day was 89017 in over 931 trades.

The stock hit an intraday high of Rs. 212.5 and intraday low of 207.75. The net turnover during the day was Rs. 18669829.


Source: Equity Bulls

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