Metal stock hits record high in a weak market. Should you buy post Q3?

Shares of Jindal Stainless Ltd (JSL) rose to hit record high of 263 apiece on the BSE in Wednesday’s trading session even as the company’s net profit fell over 32% drop in consolidated profit at 298 crore for the quarter ended December 2022 (Q3 FY23). Its revenue from operations increased to 6,349 crore over 5,670 crore in the year-ago period. The benchmark BSE Sensex fell over 700 points today.

“JSL reported a healthy uptick in sales volumes in Q3FY23. For the quarter, standalone sales volume was up 33% YoY, 22% QoQ. EBITDA of standalone operations came in higher than our estimate, aided by healthy sales volume. JSL’s share price has given a return of around 31% in the last one year (from around 196 in January 2022 to around 257 in January 2023),» said brokerage and research firm ICICI Securities which has maintained its BUY rating on the metal stock with a target price of 300 per share. 

For the quarter, JSL’s standalone operations reported sales volume of 330427 tonnes, higher than our estimate of 28500 tonnes. EBITDA/tonne of standalone operations came in at | 18834/tonne, higher than estimates of 18,000/tonne. Hence, ensuing standalone EBITDA for the quarter was at 622 crore (up 51% QoQ), higher than our estimate of 513 crore.

«Demand improved, which should help JDSL report EBITDA/t of around 20,000-plus in Q4FY23. Management is confident of achieving upper-end of EBITDA/t in FY24 (guided 21-23k/t), including JUSL. Besides, the reduction in net debt will unlock further potential,» said another brokerage Edelweiss which has retained ‘BUY/SO’ on Jindal Stainless shares with a target price of 346 earlier 331.

Jindal Stainless (JSL) is among leading stainless steel manufacturing companies in the world & India’s largest stainless steel manufacturer. JSL operates an integrated stainless steel plant at Jajpur, Odisha. The complex has a total stainless steel capacity of 1.1 million tonnes per annum. The company has readily available infrastructure for cost efficient brownfield expansion.

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


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