Jindal Stainless Steel - Rs.83.00

Jindal Stainless Steel Ltd. (JSSL), is a Rs. 2600 cr. turnover company is the flagship company of the Jindal Organization. It is the largest integrated manufacturer of quality Stainless Steel in India that caters
to more than 40 per cent of the total demand for Stainless Steel in the country and ranks amongst the top 10 producers globally. Products ranging from Stainless Steel Hot Rolled / Cold Rolled Coils, Plates & Flats, to Slabs and Blooms are produced keeping both national as well as international standards in mind. The main reason for the success of JSSL is the fact that everything from melting, casting to hot rolling and cold rolling is done in-house. Recently, the company acquired Maspion Stainless Steel of Indonesia, which is a Cold Rolling Mill with a capacity of 50,000 TPA, for $ 30 mn and is planning to double its capacity by the end of this fiscal. The company also wants to acquire the Salem Steel Plant of SAIL and is waiting for the government’s clearance on it.

The company has an integrated stainless plant at Hisar in Haryana and a Ferro Chrome unit at Vizag. It also has an offshore facility in Ohio under the name of Massillon Stainless Inc. with a cold rolling capacity of 50,000 tonnes. The Hisar plant has capacity of 5,00,000 TPA with integrated operations from melting to continuous casting of billets and blooms to hot rolling and cold rolling. An exclusive complex for manufacturing stainless steel for razor and surgical blades has been created. A coin blanking line has also been installed while its Vizag Ferro Alloys plant has an installed capacity of 40,000 TPA of high carbon Ferro Chrome. The company is upgrading its Hisar plant and has a mega expansion plan with a capex of Rs.450 cr. in a phased manner till 2007. By 2005, the company is increasing its steel melting capacity from 5,00,000 to 6,00,000 TPA, Steckel Mill form 4,00,000 to 5,00,000 TPA and by 2007 its Cold Roll capacity will be increased from 90,00 to 2,50,000 TPA. its ambitious greenfield project at Duburi in the State of Orissa is under implementation. Phase-I of the project is expected to be completed by the end of FY06. It will be backward integrated plant with capacity of 1,50,000 TPA of Ferro Chrome, 30,000 TPA of Ferro Manganese, 60,000 TPA of Silico Manganese and a Coke Oven battery unit with a capacity of 3,00,000 TPA. It is also setting up a 40 MW power plant for its own consumption. In Phase 2, the company is planning to set up a stainless steel melting unit with capacity of 8,00,000 TPA and 120 MW power plant with an capex of Rs.1000 cr.

For the half year ending Sept 2004, its net sales jumped 30 percent to Rs.1376 cr. whereas NP reported a modest gain of 7 per cent to Rs.91 cr. due to higher interest, depreciation and deferred tax provisioning. The company has a strong balance sheet with Rs.537 cr. of reserves on its small equity of Rs.20 cr. Its RONW is 40 per cent and ROCE is 27 per cent with OPM of 17 per cent. Looking at the company’s expansion plans, thrust on exports and higher stainless steel prices, it is estimated that the company will report Net Sales of Rs.2850 cr. and NP of around Rs.190 cr. leading to an EPS of Rs.19 on its current equity of Rs.20 cr. But equity dilution is expected going forward which may reduce the EPS to around Rs.15-16 on the diluted equity of Rs.25 cr. It is a relatively safe bet at the current price with an upside potential of 50 per cent in the next 15 months.