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Performs well…

About the stock: Jindal Stainless (Hisar) (JSHL) is one of the leading players in the Indian stainless steel market with its manufacturing facility located in Hisar, Haryana with an installed capacity of 0.8 million tonnes per annum (MTPA).

* JSHL is the largest specialty stainless steel producer in India with a diversified value-added product portfolio

* JSHL is the world's largest producer of SS strips for razor blades and India's largest producer of coin blanks.

Q1FY22 Results: JSHL reported a healthy performance in Q1FY22.

* On a consolidated basis, JSHL reported a topline of | 2776 crore, up 226% YoY but down 11% QoQ. Consolidated EBITDA was at | 412 crore, up 864% YoY, 2% QoQ. Consolidated PAT in Q1FY22 was at | 359 crore, up 2%QoQ

What should investors do?

JSHL’s share price has grown by ~4x over the last 18 months (from ~| 73 in February 2020 to ~| 293 levels in July 2021).

* We maintain our BUY rating on the stock

Target Price and Valuation: We value JSHL at | 390, based on merger ratio.

Key triggers for future price performance:

* JSHL has planned expansion of precision strip capacity from 22000 tonnes per annum (TPA) to 60000 TPA in two phases at a total capex of | 250 crore for both phases (includes earlier announced capex of | 190 crore). After the first phase of expansion the capacity would be expanded to 48000 TPA and is likely to be completed by Q2FY22. Post the second phase, capacity would be expanded to 60000 TPA and would be completed by Q4FY23

* JSHL is also expanding blade steel capacity from current capacity of 14000 TPA to 24000 TPA in two phases at a total capex of | 200 crore for both phases. After the first phase, capacity would be expanded to 20000 TPA and is likely to be completed by Q2FY23 while post the second phase capacity would be expanded to 24000 TPA and be completed by Q2FY24.

* For FY22, the company has upward revised its EBITDA/tonne guidance to |18000-|20000/tonne (from |15000-|17000/tonne earlier).

Alternate Stock Idea: Apart from JSHL, we also like Ratnamani Metals and Tubes.

* Leadership position in stainless steel pipes and tubes segment, differentiates RMTL from its peer group

* BUY with a target price of | 2400

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