Multibagger Stock: Jindal Stainless zooms over 620% in 23 months, 3300% in 4.5 years. Is it still a buy?

Multibagger Stock: Jindal Stainless, India’s leading stainless-steel manufacturer, has witnessed an extraordinary surge in its stock price in recent months, delivering handsome returns to its shareholders. The stock's upward trajectory began in June 2022 and has continued since, with the scrip setting new record highs each month.

Since June 2022, the stock has soared from ₹99 per share to its current price of ₹716, marking a remarkable gain of 623%. Meanwhile, from its low of ₹21 hit in March 2020, the stock has skyrocketed 3,309%.

Notably, Jindal Stainless has consistently delivered positive returns every year since calendar year (CY) 2019. In CY19, the stock rose by 13%, followed by gains of 95% in CY20, 162% in CY21, 21% in CY22, and 140% in CY23. So far in the current year, the stock is already up 25.25%.

Jindal Stainless is among the top stainless-steel players in India and among the top five stainless-steel makers globally (excluding China). The company’s product range includes stainless steel slabs, blooms, coils, plates, sheets, precision strips, blade steel, and coin blanks.

In the last few years, it undertook strategic acquisitions, enhancing its raw material integration and downstream value-added product (VAP) capacities. Besides, the company has a three-pronged strategy aimed at increasing its consolidated capacity by 40%, from 3 million tonnes to 4.2 million tonnes by FY27.

A crucial factor in stainless-steel manufacturing is the price of nickel (50% of the cost). To ensure the long-term availability of nickel, the company entered into a JV to develop and operate a nickel pig-iron (NPI) smelter at Halmahera Islands, Indonesia. Operational since August 24, this development, according to analysts, will ensure a long-term supply of 0.2 million tonnes of NPI, with an average nickel content of 14%, for producing stainless steel.

Stock expected to continue its stellar rally

Despite the massive rally in shares, domestic brokerage firm Anand Rathi anticipates that the upward trend will likely continue. In its latest note, the brokerage initiated coverage on Jindal Stainless with a ‘buy’ rating and a target price of ₹870 per share. The brokerage believes that the growing demand for stainless steel (SS) in the coming years will support this continued growth.

The brokerage is optimistic about SS consumption, driven by the booming manufacturing industry and surging demand from sectors such as sustainable construction, automotive applications, and consumer durables. It projects that SS consumption will steadily rise, reaching 20 million tonnes by 2047.

"Driven by success stories across ART and ABC globally, SS (termed the ‘metal of the future’) is expected to surpass growth rates of other major metals. Demand in new-age sectors and decades-long life cycles with the least maintenance make it an ideal choice for new-age sectors and defence," said Anand Rathi.

In the past, the company was a flat SS manufacturer, however, its foray into rebars, wire rods, and decorative long SS opens up massive opportunities in infrastructure, predominantly a long SS sector. Further, companies' focus on VAP CR SS helps Jindal Stainless tap domestic and export markets.

Considering these positive triggers, the brokerage built in a 13% revenue CAGR over FY24-27, better than carbon-steel manufacturers (SAIL 7%, JSW Steel 10%).

The brokerage further highlighted that Jindal Stainless's balance sheet has seen significant improvement following the amalgamation with its holding company in March 2023. Net debt has reduced substantially, dropping from ₹119 billion in FY14 to ₹36 billion in FY24.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.