𝗟𝗼𝗻𝗴 𝗧𝗲𝗿𝗺 ®™

Jindal Stainless Limited (JSL) 600-700 Expected level 800 Support 500

Threats  Cheap Imports from China and Indonesia, especially in the 200 series, could disrupt domestic pricing and margins.  Fluctuations in nickel, chromium, and scrap steel prices may impact cost structures, leading to margin pressure.  Geopolitical and supply chain disruptions may affect raw material procurement and create logistics challenges.  A demand slowdown could result from sluggish growth in the infrastructure, automotive, or real estate sectors.  The implementation of EU CBAM and other environmental levies could increase export costs

Opportunities  The growing adaptability of stainless steel in railways (Vande Bharat), metro projects, infrastructure, and defense leads to significant growth potential.  Policies like Make in India, the PLI scheme, and potential anti-dumping duties on Chinese imports could strengthen domestic business.  Expansion into value-added & specialty products will allow JSL to focus on high-margin products like defense-grade and lightweight automotive alloys.  The increasing global demand for sustainable and high-quality stainless steel offers opportunities for expanding exports.  JSL has implemented various green initiatives, such as floating solar plants, biofuel integration, and slag recycling position.

Weaknesses  JSL has a heavy dependency on nickel, stainless steel scrap, and ferroalloys, which are subject to price fluctuations and can impact profitability.  Capital-intensive expansion may strain short-term cash flows.  Competitive pricing pressures from imported stainless steel limit the company's ability to pass on costs further in the supply chain.  Compliance with environmental norms, carbon taxation (CBAM), and safety regulations requires continuous investment and adaptation.  The industry is highly exposed to cyclicality and dependent on broader economic trends, leading to a volatile profitability outlook.

Strengths  JSL is the largest stainless steel manufacturer in India with a dominant market share.  It offers a wide range of stainless steel grades (200, 300, 400 series), catering to various sectors like automotive, railways, construction, new-age, and defense.  JSL is strengthening raw material security through backward integration by investing in an NPI plant in Indonesia.  The company demonstrates a strong commitment to renewable energy (wind, solar), circular economy (slag recycling, metal recovery), and biofuel integration.  Recent strategic acquisitions and capacity expansions provide long-term growth headroom.

Industry overview Stainless steel has become the preferred metal due to its higher resistance to corrosion & heat, better strength-to-weight ratio, aesthetic appeal, and complete recyclability. These properties make it ideal for several end-user applications. During 1980-2021, carbon steel demand posted ~2.4% CAGR, while stainless steel posted ~5.4% CAGR, outpacing other metals’ growth and highlighting a clear shift in material preference.

Product portfolio Stainless steel is considered a value-added and sustainable green metal. It finds applications across sectors such as ABC, ART, consumer durables, and the process industry.  The company offers a wide range of products, such as stainless steel slabs/blooms, HR/CR coils, plates, sheets, precision strips, coin blanks, razor blades, and others (including rebars, pipes, and tubes).  In India, JSL is a prominent stainless steel manufacturer in series 200, 300, 400, and duplex stainless steel products.  After the recent acquisitions, the company has enhanced its long steel product portfolio to include products such as pipes, tubes, and wire rods, along with industrial tubes and decorative stainless steel, which is expected to boost the VAP offering. May 2025

Global & domestic Footprint

Current plan capacity

Company overview A leading player in the Indian stainless steel industry  JSL is a leading integrated stainless steel manufacturer in India. Currently, the company operates two manufacturing facilities at Jajpur and Hisar with a cumulative melt capacity of 3mtpa. The capacity can be scaled to +4mtpa (further expansion capability of 1.6mtpa at Hisar and 1mtpa at Jaipur).  Post the merger, JSL has become the eighth-largest stainless steel manufacturer in the world and ranks among the top five players globally, excluding China.  JSL operates ~16 stainless steel processing facilities across India and internationally, including Spain and Indonesia, and maintains a global presence across 12 countries.  The facility in Spain (Iberjindal S.L.) operates primarily as a processing and service center rather than a production facility. It is equipped with a combo line (18ktpa) and polishing line (14.5ktpa). In Apr’24, JSL acquired the remaining 30% stake from its JV partner (Fagor Industrial, S.Coop), becoming the sole owner of Iberjindal S.L.  JSL has entered into a JV for developing and operating a stainless SMS in Indonesia with a production capacity of 1.2mtpa, increasing its total melting capacity by 40% to 4.2mtpa.  JSL emphasizes sustainability by manufacturing stainless steel using scrap in electric arc furnaces, minimizing greenhouse gas emissions, and ensuring 100% recyclability without compromising quality. The company aims to reduce carbon emission intensity by 50% before FY35 and net zero by 2050.

Building a stainless future and navigating uncertain waters;  Following the merger, JSL clocked a 6% revenue CAGR, primarily driven by a 12% volume CAGR, partially offset by NSR moderation. EBITDA recorded a compounded decline of 3% during FY22-25 due to weak NSR and a surge in input prices.  Going forward, we estimate JSL to post a 10% CAGR in volumes and a 4% CAGR in NSR, driving revenue growth at a similar rate of 14% CAGR over FY25-27. New capacity additions will support upstream production and cater to rising demand. JSL is also expanding its VAP share via acquisitions (CSPL, JSUL, RSSL, RVPL), which is expected to enhance NSR. We anticipate EBITDA/t to range between INR20,500 and 22,000, supported by a better cost structure and a higher share of VAP with an improved mix. JSL has deleveraged its balance sheet from the peak of INR103b during FY16 to INR40b as of FY25, resulting in a net Debt/Equity ratio of 0.2x. RoE, which had reduced to 15% in FY25 (vs. 18% in FY23), is likely to remain stable at 16% in FY27.  Considering the strong focus on capacity expansion, RM integration, enhanced VAPs share, and tight B/S control, we initiate coverage on JSL with a BUY recommendation. We value the company at 10x on FY27E EV/EBITDA, arriving at a TP of INR770 per share.

Operational synergies via integration, expansion, and value addition  The company has streamlined its corporate structure by merging with its promoter holding company (Jindal Stainless - Hisar) and acquiring key assets. This has led to increased capacity, enhanced backward integration, and downstream product diversification and value addition. As a result, JSL has become the largest stainless steel player in India and one of the top global manufacturers.  JSL has formed two JVs in Indonesia to establish an NPI facility and an SMS, ensuring a stable nickel supply and reducing price volatility. Recent acquisitions (CSPL, JSUL, RSSL, RVPL) complement these efforts, allowing JSL to handle increased melt capacity and expand its VAP share.

RM security + backward integration = Mitigating input cost volatility  Nickel, which accounts for ~50% of input costs, is a critical raw material for SS production. India lacks domestic reserves and relies on imports, primarily ferronickel and stainless steel scrap. However, global scrap availability is tightening due to export restrictions and disruptions like trade tension. JSL is strategically mitigating the nickel price volatility through backward integration.  To secure long-term supply, JSL has entered into a JV with New Yaking Pte Ltd for a Nickel Pig Iron (NPI) smelter in Indonesia (49% stake). The facility has been operational since Aug’24, ensures an annual supply of 0.2mt NPI with 14% nickel content and reduces JSL’s exposure to nickel price fluctuations

Strategic expansion to strengthen its global leadership  Jindal Stainless (JSL) is India’s leading stainless steel manufacturer with a 3mt capacity (plans to expand to 4.2mt by FY27). JSL operates a wide network of 16 stainless steel manufacturing and processing facilities in India and internationally. Its product portfolio includes stainless steel slabs, blooms, coils, plates, sheets, precision strips, wire rods, rebar, blade steel, and coin blanks. JSL is aggressively expanding its capacity and enhancing backward integration to drive sustainable and profitable growth. Additionally, the company focused on enhancing its value-added portfolio, further supporting margins.  Following the merger, JSL’s revenue recorded a 12% CAGR over FY22-25, primarily driven by a 12% volume CAGR, partially offset by NSR moderation. During the same period, EBITDA posted a compounded decline of 3% due to weak NSR and a surge in input prices. In line with the EBITDA, APAT also registered a 7% compounded decline over the same period. Considering the robust demand, capacity expansion plans, and a focus on value- added products, we expect JSL to strengthen its market dominance and achieve a 14% CAGR of revenue growth driven by volume growth of 10% CAGR, coupled with NSR improvement of 4% CAGR over FY25-27. Strong revenue growth, coupled with improved cost structure, is expected to drive an EBITDA/APAT CAGR of 17/21% over FY25-27.  JSL has deleveraged its balance sheet from the peak of INR103b during FY16 to INR40b as of FY25. We expect its OCF at INR62b, which would comfortably fund the ongoing capex of INR40b during the next two years. JSL’s RoE slipped to 15% in FY25 (vs. 18% in FY23), and it is likely to remain steady at 16% in FY27.  At CMP, the stock trades at 8.4x EV/EBITDA on our FY27 estimate. We initiate coverage on the stock with a BUY rating and a TP of INR770 (premised on 10x FY27E EV/EBITDA). We believe that JSL’s focus on strategic acquisitions and greater raw material security will further strengthen its growth prospects

Expansion underway to cater to robust demand  JSL is executing a strategic INR57b investment plan to expand its capacity, enhance downstream operations, and diversify its product portfolio. Over 40% of this capex has already been incurred as of FY25, increasing the total capacity by 40% to 4.2mtpa by FY27.  As part of its overseas presence, JSL has entered into a JV in Indonesia to establish a 1.2mtpa Steel Melt Shop (SMS). Domestically, JSL is strengthening its downstream operations, particularly in Jajpur.  Further, JSL has acquired Jindal United Steel (JUSL) with a hot (3.2mtpa) and cold (0.2mtpa) rolling capacity. It is also diversifying into the infra space by acquiring Rathi Super Steel (RSSL) and Rabirun Vinimay (RVPL).  JSL aims to increase the share of its CR products to 75% (vs. 45% currently) with the acquisition of Chromeni Steels, which has a capacity of 0.6mtpa and the potential to expand to 4mtpa.

Bear Case  A slowdown in domestic demand could hinder stainless steel volume growth. Furthermore, cheap stainless steel imports from China may erode the pricing power of domestic manufacturers. This could lead to sluggish volume CAGR of 8%, with flat NSR over FY25-FY27. As a result, revenue is expected to post an 8% CAGR, where volume gains may offset the any negative impact led by weaker NSR.  Geopolitical tensions and logistical challenges could disrupt raw material availability, causing price volatility and supply chain disruptions. This may impact business operations, resulting in operating margin moderation. Hereby company could see modest EBITDA of INR20,000/t (vs. INR19,600/t in FY25) could result in ~9% CAGR for EBITDA, reaching INR55b over FY25-27.

Scenarios analysis Bull Case  Robust economic growth, coupled with supportive government initiatives like the PLI scheme and Make in India, is set to boost demand across sectors like infrastructure, railways, automotive, new-age industries, and the defense sector, fueling stainless steel demand in India. Additionally, the tariff barriers on Chinese imports will safeguard domestic players, creating a level playing field.  Revenue is projected to post ~21% CAGR, reaching ~INR573b over FY25-27. This growth will be driven by strong volume expansion from the ramp-up of new capacities and healthy NSR, supported by a higher VAP share.  Strategic investments in renewable energy and backward integration for cost control are expected to drive margin accretion. With EBITDA improving to INR23,500/t (vs. FY25 reported EBITDA), it is expected to result in a 26% CAGR, reaching INR74b over FY25-27.

Valuation The industry is poised for strong growth, backed by rising stainless steel adaptability across sectors and government initiatives for mega infrastructure projects. The thriving manufacturing industry, sustainable construction, automotive sector, consumer durables, and growing new-age sector are expected to steadily propel India’s stainless steel consumption to 7.3mt by FY31 and 12.5-20mt by 2047. JSL has evolved from being solely a flat SS producer to a diversified long SS player, expanding into rebar, wire rods, and decorative SS, unlocking significant infrastructure opportunities. Additionally, its focus on value-added CR SS strengthens its position in both domestic and export markets. Considering these tailwinds, JSL’s revenue CAGR is projected to be ~14% over FY25-27, outperforming other carbon steel players in the industry. With steady margins of INR20,500-22,000/t, EBITDA is expected to reach ~17% CAGR over FY25-27. A healthy CFO and steady capex outflow will ensure JSL’s B/S remains resilient.