Jindal Stainless - Case For Value Creation Intact: ICICI Securities
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ICICI Securities Report
Decline in Chinese stainless steel prices has compressed the converter spreads. We are not sure when exactly the spot will percolate into Jindal Stainless Ltd. or Jindal Stainless Hissar Ltd. spreads, but we continue to build in ~Rs 17,500/tonne of normalised spreads for FY23/24E (from Rs 27,000/tonne expected in Q3 FY22).
With ~1 million tonnes per annum volume expansion underway, we see progressive deleveraging/free cash flow generation, improvement in consolidated return on capital employed (because of significantly lower capex intensity) and improvement in valuation multiples which a converter business model deserves.
National Company Law Tribunal approval for merger of Jindal Stainless and Jindal Stainless Hissar is awaited.
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