Shares of JSW Steel and Jindal Stainless are on investors’ radar among other sectoral stocks as expectations of a price hike by major steel players in March 2023 increase. The hopes of price hike come as hot rolled coil (HRC) prices in traders’ market have crossed Rs 60,000/te on average for the first time post June 2022.
In terms of returns, Jindal Stainless shares have turned multibagger in the last six months. The stock zoomed 127% in the last six months outperforming peers such as Tata Steel, JSW Steel, Tata Steel Ltd, SAIL, Hindalco Industries Ltd and NMDC during the period.
In a period of three and five years, the Jindal Stainless stock has zoomed 620 % and 211%, respectively.
Jindal Stainless shares hit an all-time high of Rs 297, rising 6.26% intraday today. The stock has gained 15.67% in the last five sessions.
The stock of the stainless steel maker has gained 24% this year and risen 50% in the last one year. Total 1.19 lakh shares of the firm changed hands amounting to a turnover of Rs 3.47 crore on BSE. Market cap of Jindal Stainless rose to Rs 15,541 crore.
In terms of technicals, the relative strength index (RSI) of Jindal Stainless stands at 65.2, signaling it’s trading in the overbought. Jindal Stainless stock has a one-year beta of 1.1, indicating high volatility during the period. Jindal Stainless shares are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages. The stock is technically trading in a bullish range.
Jindal Stainless Ltd reported a 28% fall in net profit to Rs 314 crore ($38.58 million) for the third quarter ended December 31 from Rs 435 crore a year earlier.
However, the New Delhi-based company’s revenue from operations climbed 12% to Rs 6,350 crore in Q3 from Rs 5,670 crore a year earlier.
Exports fell to nearly 5% in the December quarter following the government’s decision to introduce an export tax on certain steel intermediaries in May. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) fell 34.14% to Rs 524.79 crore in Q3 against Rs 796.82 crore in the December quarter of the previous fiscal.
On the other hand, shares of JSW Steel were trading 1.26% lower at Rs 674.35 today against the previous close of Rs 682.95 on BSE. The stock has gained 7.06% in a year and fallen 11.88% in 2023. Total 0.29 lakh shares of the firm changed hands amounting to a turnover of Rs 1.98 crore on BSE. Market cap of JSW Steel fell to Rs 14,343 crore. However, the steel stock has delivered multibagger returns of 183% in the last three years.
In terms of technicals, the relative strength index (RSI) of JSW Steel stands at 37.2, signaling it’s neither oversold nor overbought. JSW Steel stock has a one-year beta of 1.1, indicating high volatility during the period. JSW Steel shares are trading higher than the 5 day and 200 day moving averages but lower than 20 day, 50 day and 100 day moving averages.
The steel major reported a 89% fall in net profit to Rs 490 crore in the third quarter against a profit of Rs 4,357 crore in the last year period. Revenue from operations grew 2% year-on-year to Rs 39,134 crore as against Rs 38,017 crore reported in the corresponding period of last year. JSW Steel logged its combined crude steel production at 6.24 million tonne for the third quarter, showing a growth of 17% year-on-year. This includes the production at jointly controlled entities. The company had reported a loss of Rs 848 crore in the previous September quarter. Sequentially, revenue from operations was down 5%, largely due to lower sales realisation.
Here’s a look at what analysts and brokerages said on the outlook of the two steel stocks.
Jindal Stainless
Vaishali Parekh, Vice President for Technical Research at Prabhudas Lilladher said,” The stock has given a decent run up from the bottom made near Rs 96 levels and has gained much strength to breach above the previous peak zone of Rs 225 level to indicate a breakout on the daily chart. Recently, there has been some resistance witnessed near Rs 274 levels and has the near-term support zone near Rs 240 levels where it can halt the profit booking activity. The RSI is also well placed and can anticipate for further rise in the coming days. The trend shall turn down or weaken only a decisive breach below Rs 225-220 zone and one can think of exiting from their holding. At the same time, a decisive breach above Rs 275 levels would further trigger for fresh upward move for next target of Rs 305-312 levels.”
Nuvama has assigned a target of Rs 331 for the steel sector stock. Nuvama said it visited Jindal Stainless’ Jajpur, Odisha plant, and that its earnings growth confidence is now stronger. Nuvama said it visualised that the 1mtpa stainless steel expansion is geared to start commercial production from March 2023-end, providing volume growth until FY25. The optionality of capacity growth at low capex exists, keeping return ratios high, it said.
With in-principal approval of NCLT regarding merger with Jindal Stainless Hisar (JSHL), Nuvama expects merger by FY23-end, making JDSL among top-10 stainless steel producers in the world with an installed capacity of 2.9mtpa.
“We now consider JSHL too with NCLT’s nod for the merger. With this, we raise our EV/Ebitda multiple to 6 times (earlier 5.5 times) to give due credit to the market leader of stainless steel , high earning growth (31 per cent profit CAGR during FY23-25E) and a strong balance sheet (FY24E net debt/Ebitda of 0.8 times). Also, we rollover and take the average of FY24E/FY25E earnings to arrive at a target of Rs 331 from Rs 260 earlier,” it said.
Abhijeet from Tips2trade said, “Jindal Stainless looks bullish but also slightly overbought on the Daily charts with next resistance at 306. Investors should book profits at current levels and wait for a dip near support of 240-243 to initiate fresh buy positions.”
JSW Steel
Abhijeet from Tips2trade said, “JSW Steel Ltd has strong resistance on the Daily charts at Rs 686. Investors should buy only if Daily close is above resistance level for targets of Rs 718-736. Support will be at Rs 668.”
Sneha Seth, Derivatives Research Analyst, Angel One said, “JSW Steel Ltd is one of the strongest candidates if compared to its peers. Lately, we are witnessing a rangebound move of merely 45-50 points for last couple of weeks now. Technically, the overall chart structure remains bullish, there is higher top higher bottom formation, and it is also trading close to the rising trend line support placed around Rs 690-695 odd zone. On the upside, any sustainable move beyond Rs 735-740 odd zone should trigger fresh buying interest, which can bring it towards record highs.”
Sunil Damania, Chief Investment Officer at MarketsMojo said, “Steel prices, we expect, will remain fairly stable. With the government pledging a large capex in this year’s budget, steel demand would be boosted even further. And if that has to happen, a company like JSW Steel will undoubtedly benefit from it. Due to the El Nino impact, there is some uncertainty regarding how the monsoon will play out. However, if the monsoon is far weaker than anticipated, this could dampen steel demand, which could impact JSW Steel. Including both good and negative considerations in mind, a further factor has emerged, namely the Turkish earthquake. The earthquake in Turkey has impacted steel capacity, causing it to go out of production. Hence, rebuilding Turkey would necessitate an increase in steel consumption. Due to the increasing price of steel in Europe, companies such as JSW Steel can now export their goods to the European market. Hence, based on the current positive and negative variables, we believe that that JSW Steel should be retained in the portfolio, but no further purchases should be made until there is greater certainty over the monsoons.”
Abhijeet Bora, DVP Research Analyst at Sharekhan by BNP Paribas said, “We believe that earnings downgrade cycle is largely over for steel companies and a recent recovery in steel price would drive gradual margin/earnings improvement for steelmakers. Having said that, we believe situation for steel players is wait and watch as steel margin upcycle (as seen in 2020-2021) is still not clearly visible given demand concern in US/Europe and concern of elevated coking coal price. Hence, we have a reduce rating on JSW Steel with price target of Rs 620 as valuation of 8.2x FY24E EV/EBITDA seems rich as compared to the historical average of 6.5x and we expect net debt (stood at Rs 69,498 crore as of December 2022) to remain high given the company’s capex plan.”
In its weekly sectoral outlook, ICICI Securities has assigned a sell call to the JSW Steel stock and given a buy call on Jindal Stainless stock.
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