Hem Securities has issued a BUY recommendation for Jindal Steel & Power Limited (JINDALSTEL) with a target price of ₹1,182, implying a potential upside of 16% from the current market price of ₹1,021. The company has demonstrated resilience through solid operational performance in Q1FY25, a focus on expanding capacity, and reducing net debt, making it a compelling investment option in the steel sector. Below is a pointwise breakdown of the key highlights and investor considerations for Jindal Steel & Power.

Strong Q1FY25 Financial Performance

Jindal Steel & Power posted impressive growth in revenues and profits for Q1FY25.
The company’s consolidated revenues for Q1FY25 stood at ₹13,617.84 crore, marking an 8.17% year-on-year (YoY) growth and a 0.97% sequential rise. Operating profit surged by 16.15% quarter-on-quarter (QoQ) to ₹2,839 crore, with operating margins reaching 20.85%. Despite a 20.92% YoY decline in profit after tax (PAT), the company achieved a robust 43.33% QoQ growth, reporting ₹1,337.92 crore in net profits for the quarter.

Expansion Plans Driving Future Growth

Jindal Steel is on track to complete its major expansion projects by FY26.
The company is progressing well with its 6 million metric tons per annum (MTPA) expansion project, with the blast furnace and basic oxygen furnace (BOF) expected to be operational by Q4FY25. Ancillary facilities are targeted for completion within the next 9 to 12 months. This expansion is expected to significantly increase production capacity and drive future sales growth.

Cost Management and Debt Reduction

Effective cost management and reduced net debt enhance the company’s financial stability.
Jindal Steel has reduced its consolidated net debt to ₹10,462 crore as of Q1FY25, down from ₹11,203 crore in the previous year. This reduction has improved the company’s net-debt-to-EBITDA ratio to 1x, which is among the best in the industry. Additionally, lower coking coal and thermal coal prices, coupled with higher productivity, have contributed to better cost management in the company’s steelmaking operations.

Valuation and Target Price

Hem Securities values Jindal Steel at 13.6x FY26E earnings, maintaining a BUY rating with a target price of ₹1,182.
The stock is currently trading at ₹1,021 with a price-to-earnings (P/E) ratio of 18.71x. The revised target price of ₹1,182 implies a potential upside of approximately 16%, supported by the company’s improving EBITDA margins, strategic debt management, and ongoing capacity expansions.

Long-Term Growth Potential in Steel Demand

The steel sector is poised for long-term growth, and Jindal Steel is well-positioned to benefit from rising demand.
India’s domestic finished steel consumption has grown by 13.6%, driven by strong demand from the automotive and infrastructure sectors. The government’s increased capital outlay for infrastructure development in FY25, combined with the rising adoption of electric vehicles (EVs), will continue to support demand for steel products. Jindal Steel, with its integrated operations and value-added product focus, is primed to capture a larger share of this growing market.

Investment Risks and Challenges

Despite its strong performance, Jindal Steel faces risks related to project delays and regulatory changes.
While the company has a track record of project delays, any further setbacks could impact its revenue growth targets. Additionally, the steel industry operates in a highly competitive and regulated environment. Changes in mining regulations or environmental standards could also affect the company’s profitability and operational efficiency.

Conclusion and Investor Outlook

Jindal Steel & Power offers a compelling investment opportunity with strong growth prospects and disciplined financial management.
Hem Securities reiterates its BUY rating on Jindal Steel with a target price of ₹1,182. Investors with a medium to long-term horizon can expect solid returns, supported by the company’s strategic expansion, efficient cost management, and focus on high-margin, value-added products.

In conclusion, Jindal Steel & Power’s robust Q1FY25 results, ongoing capacity expansion, and prudent debt reduction strategy make it a standout performer in the steel sector, offering substantial upside potential for investors.