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Domestic brokerage and research firm ICICI Securities sees further upside on multibagger stock Jindal Stainless that has rallied nearly 140% this year (year-to-date or YTD). The brokerage house has maintained its Buy recommendation on the metal stock with a target price of 250 per share.

“400 series stainless steel demand continues to move up in India and has increased its volume share. JSL has clear cost advantage in 400 series, which will eventually move 400 series to be the highest volume contributor progressively," the note stated.

The through cycle EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) has moved up to 18,000-20,000/te from around Rs13,000/te five years back. Cost efficiency measures like improved power plant PLF, improving coal GCV, work on induction furnace, rail sidings have added to throughcycle EBITDA, as per the brokerage. 

Reduced working capital along with reduced logistics costs and reduced inventory holding/valuation costs along with reduced forex volatility has also helped EBITDA margins, ICICI Securities highlighted.

“With ~1mtpa volume expansion underway, we see progressive deleveraging/FCF generation, improvement in consolidated RoCEs (because of significantly lower capex intensity) and improvement in valuation multiples which a converter business model deserves. NCLT approval for merger of JSL and JSHL (Jindal Stainless (Hissar)) is awaited," it added.

JSL is exposed to price changes in some of its key raw materials. This aspect, as per ICICI Securities, could lead to a scenario of demand deterioration when prices fluctuate. Volatility in these materials could lead to an increase in inventories leading to some impact on the company’s performance.

Jindal Stainless (JSL) posted a five-fold jump in consolidated net profit at 411.6 crore for the September quarter, mainly on account of higher income, as compared to 80.6 in the year-ago quarter.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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