Jindal Stainless may see 20% appreciation in six months

Jindal Stainless may see 20% appreciation in six months

By Rajiv Kapoor | 14 October, 2017

The Indian stainless steel industry holds the second position in the world for stainless steel production, having registered a growth of 8.6% for FY 2017. Several government initiatives like smart cities, manufacturing, improving sanitation facilities, better waste management practices and infrastructure creation are likely to accelerate the growth momentum. With the country’s per capita consumption of stainless steel at only 2 kg compared to the world average of 5.2 kg, this indicates a tremendous potential of future growth for this particular sector. There was a staggering rise in imports by about 15% in the first nine months of last year due to dumping from countries like China. But these have got reduced after the imposition in February this year. Stainless steel consumption in the country can be broadly classified into six categories—cookware and durables, engineering goods, electro mechanical industries, architectural building and construction, automobile railways and transportation. A few of the above are relatively mature applications, but some new applications are still evolving and this is likely to change the pattern of steel consumption in the future. The automobile, railway and transport segment is emerging as the sector with the fastest consumption of stainless steel in the country. There is going to be great acceptance of the metal in a wide range of applications, as positive information on the virtues of stainless steel is disseminated to the masses. Recently, Ministry of Railways announced that from FY 2018 onwards an ambitious program would be undertaken to convert about 55,000 coaches with the technological help of stainless steel. On the other hand, the Indian real estate sector consisting of residential, commercial, retail and entertainment space, hospitality projects and special economic zones is another emerging segment for stainless steel consumption in the country. On the back of rapid modernisation and urbanisation, the construction sector is going to use a lot of this metal in modular kitchens, elevators and escalators and other miscellaneous architectural products.

Jindal Stainless Ltd, with a capacity of over one million tonnes per annum is a large stainless steel manufacturer of the country. The earnings per share of the company for FY 2018 is expected to be around Rs 6, with sales and operating profit expected to grow at a CAGR of 15% and 30% respectively over the next few years. The outlook for global stainless steel industry is extremely bright, with Jindal Stainless expanding its market to new territories and simultaneously increasing its brand presence. The company is investing in technology, increasing production capacity, improving processes, developing new stainless steel products to cater to varied requirements of the market. The Jindal Stainless stock currently quoting at Rs 114 on the Indian bourses is expected to give a 20% price appreciation in six months.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.


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