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Building the next leg of growth; Compelling value ahead

We recently interacted with the management of Jindal Stainless (JDSL) to understand its growth strategy. With rising domestic stainless steel (SS) penetration, upcoming downstream capacity addition, raw-material security from Indonesian JVs and a multiyear growth project underway, we believe JDSL is well placed to ride India’s SS growth wave, making it one of our preferred plays on the sector. India's SS consumption is expected to grow at 8-10% annually, with several of JDSL's target applications growing at 12%. As SS finds greater use across railways, metros, infrastructure, automobiles, nuclear, LNG, green hydrogen and other industrial applications, the addressable market is expanding beyond traditional consumption. Recent commissioning of its 1.2mtpa Indonesia melt shop has taken its global melt capacity to 4.2mtpa, while downstream expansion in India is increasing its ability to process, certify and customize this material for higher value applications to reach its medium-term goal of achieving 3.5mtpa sales volume. JDSL is also evaluating a 4mtpa integrated greenfield port-based facility in Maharashtra, with the first 1mtpa phase targeted for FY31E. The DPR would come in the next 2 quarters, and the management is in discussions with the Maharashtra government for land acquisition. We introduce FY29E EBITDA estimates, roll forward our valuation to Sep’28 and expect JDSL to deliver volume/EBITDA CAGR of 10%/12% over FY26-29E. Following the recent correction, the stock offers an attractive entry point at 7.7x/6.7x FY28E/29E EV/EBITDA. We maintain ‘BUY’ with revised TP of INR867 (earlier INR821) on 9x EV of Sep’28 EBITDA.

India's SS story is still in early stages:

Domestic SS consumption is expected to grow at 8-10% p.a., much faster than the expected the global 3-4%. More importantly, sectors targeted by JDSL could grow at ~12%, creating an opportunity for JDSL to grow faster than the overall SS market. India consumes ~5.3mt of SS, while domestic production is only ~3.5mt. The balance is met through imports. While this highlights the competitive pressure faced by domestic producers, it also demonstrates the size of the addressable market as domestic consumption continues to expand. Growth is increasingly being driven by new applications, rather than only substitution within existing markets.

Railways and infrastructure to be major future demand creators:

The Railway Board has recently directed increased use of SS in corrosion-prone railway structures within 30km of the coast, including railway bridges, FOBs, ROBs/RUBs and rail flyovers/metro crossings. Longer life and superior corrosion resistance makes SS particularly attractive in such applications, where the lifecycle cost is much superior than the initial high price. JDSL is also pushing SS rebar through its Rathi subsidiary. The management indicated that the product has undergone extensive testing and has received government approval for infrastructure applications, opening the possibility of future railway, FOB and infrastructure tenders. This is strategically important because rebar can take SS into a much larger infrastructure market and allows JDSL to create incremental demand rather than simply compete for existing volumes.

The opportunity extends further across:

a) automobiles, metros and transportation

b) nuclear applications

c) LNG and process industries, green hydrogen, and EVs

d) desalination and water treatment, ethanol and chemical industries. JDSL's own portfolio reflects this diversification, with products spanning slabs, coils, plates, sheets, precision strips, blade steel, coin blanks, rebars and other specialized products.

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