Investors looking to invest in stocks witnessed a notable surge in JSW Steel and Jindal Steel & Power (JSPL) share prices on Thursday, October 3. Both stocks saw gains of up to 3.1% following positive sentiments from global brokerage firm Nomura, which initiated coverage with a 'Buy' rating.
At market opening, JSW Steel reached an all-time high of ₹1,059.95 per share, while JSPL recorded an intraday high of ₹1,065 per share. Around 9:28 AM, JSW Steel was trading 2.53% higher, and JSPL was up by 2.72% on the BSE, outperforming the BSE Sensex, which dipped by 0.93%.
Nomura's optimistic report on both JSW Steel and JSPL is driving investor confidence, encouraging those looking to invest in stocks to consider these companies. The brokerage set a target price of ₹1,220 for JSW Steel and ₹1,200 for JSPL, reflecting potential growth. The report highlighted that both companies have seen structural improvements in mid-cycle earnings due to robust domestic demand, cost-saving initiatives, and improved operational efficiency.
Nomura estimates that the mid-cycle EBITDA for both JSW Steel and JSPL will be in the range of ₹11,000-12,000 per tonne, supported by a favourable demand environment. They also predict a mid-cycle earnings multiple of 7.5x, which marks a significant shift for both companies in their growth trajectory.
JSW Steel, with its capacity expansion plans and focus on raw material self-reliance, remains a top pick for those aiming to invest in stocks. Nomura's report pointed out that JSW Steel's upcoming capacity alignment with the cyclical recovery, along with backward integration into raw materials, positions the company well for future growth.
The firm plans to add 7 million tonnes of capacity by FY28, growing at a compound annual growth rate (CAGR) of 5% from FY24 to FY28. Additionally, JSW Steel is targeting to become 50% self-sufficient in iron ore, which could significantly reduce production costs. This strategy, combined with the company's ongoing projects, places JSW Steel in a favourable position compared to other integrated steel players.
JSPL's capacity expansion and focus on enhanced raw material integration make it an attractive option for those looking to invest in stocks. Nomura projects that JSPL will add 6.3 million tonnes of capacity by FY27, growing at an 18% CAGR over FY24-27. The recent acquisition of thermal coal mines will meet 100% of the company's requirements, further reducing costs.
JSPL is also investing in new pellet and captive power plants, which are expected to bring additional cost benefits. With these initiatives, Nomura believes that JSPL is well-positioned to capitalise on future demand growth and enhance its market presence.
Both JSW Steel and JSPL have delivered impressive returns over the past year, outperforming the broader market and solidifying their appeal to investors interested in investing in stocks. In the last 12 months, JSW Steel has gained 33.4%, while JSPL's shares have surged by 48.2%. In comparison, the BSE Sensex has risen by 29% during the same period, showcasing the strong momentum in these steel stocks.
Nomura also highlighted the positive outlook for the broader Indian steel sector, expecting the addition of around 23 million tonnes of crude steel capacity over FY24-27. This represents a 4.8% CAGR, aligning with the long-term industry average. JSW Steel, JSPL, Tata Steel, and the ArcelorMittal & Nippon Steel JV are expected to contribute 87% of the total capacity expansion, positioning them as key beneficiaries of India's growing steel demand.
The brokerage firm also noted that despite the capacity additions, demand growth is expected to outpace supply, creating a favourable environment for steel companies. Nomura estimates that utilisation rates in the Indian steel sector could improve from 92% in FY24 to 93% in FY27.
For investors looking to invest in stocks, both JSW Steel and JSPL offer attractive opportunities driven by robust demand, strategic expansions, and positive industry trends.
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