Systematix Institutional Equities has launched coverage on two major Indian metal stocks, Jindal Steel Ltd (formerly Jindal Steel & Power Ltd) and Jindal Stainless Ltd, assigning 'Buy' ratings to both. The firm's optimistic outlook stems from strong domestic demand, strategic capacity expansion, and a long-term growth trajectory for India's integrated steel and stainless steel sectors.
India's Steel Sector: A Growth Engine
India stands as the world's fastest-growing major steel market, underpinned by continuous infrastructure investment, rapid urbanization, manufacturing sector expansion, and increasing per-capita steel consumption. Finished steel consumption has seen a compound annual growth rate (CAGR) of approximately 7% between FY19 and FY26, with installed steelmaking capacity reaching 220 million tonnes. The National Steel Policy aims for a significant increase to 300 million tonnes by 2030.
Furthermore, India is the second-largest producer and consumer of stainless steel globally, experiencing an annual domestic demand growth of 8-9%, outpacing worldwide trends. Systematix highlights that rising value addition, import substitution, premiumization, and deeper raw material integration are key factors favoring large, integrated producers with established scale and cost leadership.
Jindal Steel: Capacity Expansion and Cost Advantages
Systematix believes that Jindal Steel is poised for a multi-year phase of earnings growth. This is primarily driven by its ongoing capacity expansion initiatives and an integrated operational model. As one of India’s top five steel producers, the company has already boosted its steelmaking capacity from 9.6 million tonnes to 15.6 million tonnes and continues work at its Angul facility to become one of the nation's largest integrated steel producers.
The brokerage emphasizes Jindal Steel's significant cost advantages and raw material security, thanks to its captive iron ore resources exceeding 2 billion tonnes, coking coal assets, a 192-km slurry pipeline with 18 million tonne capacity, and a dedicated coal conveyor system. Systematix forecasts a 21% CAGR in steel sales volumes from FY26 to FY28E, largely due to additional capacity coming online. While return on capital employed (ROCE) may temporarily dip to around 9% in FY26 due to peak capital expenditure, it is expected to recover to 12-14% by FY28E as new capacities ramp up and operational leverage improves.
Jindal Stainless: Market Leadership and Diverse Demand
Jindal Stainless offers a focused investment opportunity in India's long-term stainless steel growth narrative. The company benefits from its market leadership, integrated operations, and an expanding share of value-added products. It currently fulfills approximately 50% of domestic stainless steel demand and possesses an annual melt capacity of around 4.2 million tonnes, ranking among the top five global stainless steel producers outside of China.
Demand for stainless steel across various sectors—including railways, metro projects, water infrastructure, process industries, architecture, and consumer durables—coupled with its increasing adoption in new applications, provides Jindal Stainless with a substantial runway for volume growth. With captive ferro-alloy capabilities and strategic raw material sourcing, Systematix anticipates Jindal Stainless will achieve a revenue CAGR of approximately 13% over FY26 to FY28E.
Target Prices
- Systematix has initiated Jindal Steel with a 'Buy' rating and a target price of Rs 1,338 per share.
- Jindal Stainless also receives a 'Buy' rating, with a target price of Rs 869 per share.
Disclaimer: This report is for informational purposes only and does not constitute investment advice. Readers should consult a qualified financial advisor before making investment decisions.