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Attractive risk-reward after recent correction

We upgrade Jindal Stainless (JDSL) from ‘Accumulate’ to ‘BUY’ as the recent correction offers an attractive opportunity to own India’s largest stainless-steel producer at reasonable valuation. We believe the market is overly focused on near-term concerns such as fall in LME nickel, elevated fuel costs, higher Chinese imports & export market uncertainty, overlooking JDSL’s long term growth drivers. Recent commissioning of the 1.2mtpa Indonesia melt shop & ongoing downstream expansions provide good visibility on volume growth towards ~3.5mt by FY29E, while a new SS project is being planned in Maharashtra to capture future growth. The Indonesian govt. is planning to bring nickel exports under a state entity, which would tighten the market while domestic stainless-steel prices also remain at a good discount to Chinese prices.

JDSL remains well positioned to benefit from rising stainless-steel penetration in India across transport infrastructure (railways/ metro/ auto), building & construction, process industries and building coastal infrastructure. Near-term risks remain from pricing pressure due to higher Chinese imports following the temporary suspension of QCO, while geopolitical uncertainties could impact export demand, supply chains and fuel costs. However stainless-steel players have demonstrated strong pricing power in rising RM scenarios earlier. As domestic demand remains robust with rising usage across user industries and JDSL remains only beneficiary in flat products, we expect it to deliver healthy volume growth over the medium to long term. We maintain our FY27/28E EBITDA estimates and expect JDSL to deliver 13% EBITDA CAGR over FY26- 28E. As stock has corrected over 15% in one month, it is trading at lucrative 8.8x/7.2x EV of FY27/28E EBITDA. Upgrade to BUY.

Capacity additions provide visibility on next phase of growth:

JDSL has taken its melting capacity to 4.2mtpa with recent commissioning of 1.2mtpa in Indonesia by its JV partner Tsingshan, for which they have 100% offtake agreement. The company is simultaneously expanding downstream capabilities through the 1.1mtpa HRAP line, 0.17mtpa CRAP line at Jajpur (increasing CRAP capacity to 2.67mtpa by FY28) and additional cold rolling investments at Hisar and Kharagpur for which additional capex of INR9bn has been announced. Mgmt. has earlier reiterated its target of 3.5mt sales volumes by FY29, implying ~11% volume CAGR over FY26-29E. The Indonesia facility also strengthens backward integration into nickel and improves raw material security, an important advantage given Indonesia's dominant position in global nickel supply.

Domestic SS prices at discount to China:

Domestic SS prices are currently trading at ~9% discount to Chinese on import parity level, compared to premium last year depicting import pressure. This pricing gap has emerged despite healthy domestic demand and reflects concerns around imports and temporary market disruptions. SS flat imports have grown at 18% CAGR over CY20-25 to 0.95mt. We believe the current discount is unsustainable over the medium term and provides room for domestic price increases as market conditions normalize.

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