Jindal Steel Share Price Target at Rs 1,225: Kotak Securities

Jindal Steel Share Price Target at Rs 1,225: Kotak Securities

Kotak Institutional Equities maintains its bullish stance on Jindal Steel & Power (JSP), revising its fair value upward from Rs1,150 to Rs1,225 per share. The research report highlights a robust earnings trajectory, technology-driven expansion, and disciplined financial management, amidst tempered but positive industry sentiment. With key capacity additions nearing completion and margin tailwinds materializing, the stock is positioned as the brokerage’s top BUY in the metals sector. Investors are advised to capitalize on JSP’s long-term growth drivers, with further upside possible as operational risks abate and cost efficiencies deepen.

Results Beat: Earnings Outperform on Lower Costs, Higher Realizations

JSP commenced FY26 with a notable earnings beat. The consolidated EBITDA for 1QFY26 surged to Rs29.8 billion, surpassing estimates by 9% thanks to effective cost control and higher realizations, partly offset by weaker volumes. Steel sales stood at 1.9 million tons—down 9.1% year-over-year and 10.8% quarter-over-quarter—primarily due to seasonal monsoon disruptions. However, the uplift in EBITDA/ton to Rs15,709, up 16% YoY and 35% QoQ, underlines robust margin expansion. Lower raw material (RM) costs, led by subdued coal prices and inventory gains, cushioned the bottom line despite a 7% export share, and an overall mixed demand environment.

Key Performance Indicators Q1FY26 Q4FY25 Q1FY25
EBITDA (Rs bn) 29.8 24.8 28.3
EBITDA/ton (Rs) 15,709 11,651 13,542
Net Debt (Rs bn) 144 120 -
Net Profit (Rs bn) 15.0 (3.4) 13.4

Capacity Expansions Enter Final Leg: Volumes Poised for Take-off

Phase 1 of JSP’s flagship blast furnace (BF-2, 4.6 mtpa) is primed for commissioning by August 2025, with basic oxygen furnace (BOF-2, 3.3 mtpa) to follow in September. These assets promise to be game-changers, driving a projected 16% YoY increase in steel volumes to 9.3 mn tons in FY2026. Further upside is on the horizon as BOF-3 and DRI-2 expansions add momentum through FY27. The operations at Utkal B1 coal mine, set to go live by 2QFY26, will secure near-complete backward integration for JSP and augment cost stability.

Margin Outlook: Cost Tailwinds and Strategic Integration to Support Profitability

The cost of coking coal—already down $11/ton QoQ in 1QFY26—is projected to fall another $5/ton, strengthening JSP’s margin profile. Spot domestic hot-rolled coil (HRC) prices, currently 4% below the Q1 average but rebounding from seasonal lows, provide additional support. Safeguard duties and value-added product offerings now comprising 72% of volumes further shield realizations. Management estimates that EBITDA/ton will stabilize at Rs14,697 for FY26, with sequential growth through FY27 (Rs15,547) and FY28 (Rs16,098), as cost optimisation and enhanced product mix play out.

Financial Discipline: Net Debt Rises, But Leverage Policy Holds Firm

Net debt climbed by Rs24 billion to Rs144 billion in 1QFY26, mainly owing to CAPEX of Rs22.3 billion and inventory buildup. Despite this uptick, leverage remains at a comfortable 1.48x EBITDA, safely below the self-imposed ceiling of 1.5x. Management reaffirms its commitment to prudent capital allocation, and expects cumulative net debt to decline rapidly once the current investment phase concludes.

Year Net Debt (Rs bn) Net Debt/EBITDA (x)
2025 120 1.2
2026E 131 1.0
2027E 87 0.5
2028E 11 0.0

Valuation and Target: Kotak Raises Fair Value on Robust Growth Visibility

In view of continued earnings momentum and enhanced capacity assurance, Kotak boosts JSP’s fair value to Rs1,225, applying a higher EV/EBITDA multiple of 7x FY27E, up from 6.5x previously. The projections remain compelling—Kotak forecasts an impressive 23% EBITDA CAGR and 32% EPS CAGR between FY2025 and FY2028. With the stock trading at a forward P/E of 14.1x FY26E and EV/EBITDA of 8.4x, valuation remains undemanding relative to growth prospects.

Metric 2025 2026E 2027E
EPS (Rs) 40.4 70.6 97.3
P/E (x) 24.7 14.1 10.2
EV/EBITDA (x) 11.9 8.4 6.1
RoE (%) 9.0 14.2 16.9

Strategic Updates: Downstream Focus and Mine Ramp-up Underpin Growth

JSP’s ongoing asset build-out—spanning advanced rolling lines, a nearly-complete slurry pipeline, and the ramp-up of Roida-I iron ore mine—illustrate management’s resolve to stay ahead of the curve. The share of value-added products in the sales mix has surged to 72%, with further depth expected as the downstream and specialty product lines come online.

Shareholding and Investor Positioning

Promoters hold a commanding 62.4% of the company, with institutional participation from FPIs, mutual funds, and BFIs evidencing deep confidence in JSP’s strategic path. Notably, mutual fund holdings stand at a robust 13.3%. The 52-week price band (Rs723–1,074) encapsulates the volatility premium and recovery potential inherent to the stock. The dividend yield remains modest at 0.4% for FY26E, favoring reinvestment in growth. For investors, the current price of Rs996 (as of August 13, 2025) offers attractive entry relative to the revised target.

Conclusion: BUY with High Conviction; Rs1,225 Target Offers Strong Upside

Kotak’s reiterated BUY call, alongside an upgraded target of Rs1,225, is grounded in multi-year volume tailwinds, margin accretion levers, and prudent financial stewardship. The key swing factors—timely project commissioning, sustained cost discipline, and favorable product mix—heighten JSP’s appeal for both growth-oriented and value-focused investors. As the industry cycles through volatility, JSP is set to emerge as a sector outperformer in the coming quarters, making it a compelling portfolio anchor at current levels.

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