Rating: BUY Upside: 61% Embarking on a stainless … Stainless (Hisar) (JSHL), an entity carved out...

1 GWM/Edelweiss Investment Research

Edelweiss Investment Research

Jindal Stainless (Hisar) (JSHL), an entity carved out of the erstwhile Jindal Stainless (JSL), is a leading player in the domestic stainless steel market. With 0.8mt

capacity, the company has cornered 40% market share along with group company JSL(0.8mt). Government’s sharpening focus on metro railway, airports,

modernisation of Railways along with burgenong usage of cookware and consumer durables are envisaged to spur the next leg of stainless steel market’s

growth at 8% CAGR between FY17-FY23E. We expect JSHL’s volumes to clock 11% CAGR over FY17-19E riding incremental market share gains as demand

shifts to organised players triggered by GST and imposition of 18% CVD on Chinese imports. We are valuing the stock at par with European listed

counterparts at 7x EV/EBIDTA, yeilding value of INR289/share and investments in JSL at INR41/share to arrive at target price of INR329. We recommend

‘BUY’ with an upside of 61% from current level.

Burgeoning government infra spending and rising consumerism to sustain buoyant stainless steel demand

Domestic stainless steel (SS) consumption clocked 7.6% CAGR over 2005-16 to 3.3mtpa while per capita consumption stands at a paltry 1.9kg compared

to the 6kg global avg. However, we expect India to follow in China’s footsteps—per capita consumption catapulted from mere 1.5kg in early 2000 to 9kg

in 2016—spurred by govt’s enhanced investments in infrastructure and burgeoning per capita GDP. While SS continues to remain an alternative to plastic

in cookware, its under penetration in medical, industrial and infra applications is bound to sustain the strong underlying demand momentum.

Market leadership in value additive products

JSHL, along with JSL, effectively controls 60% of the value added products market and 40% of the overall SS market in India. Balance is controlled by

unorganised players and imports (~5 lakh tons), which have been disrupted due to onslaught of GST and imposition of 18% CVD on Chinese imports (~2.8

lakh tons), respectively, throwing opportunity for JSHL to grab incremental market share. We believe the company’s leadership in specialised products

like razor blades, mint coins, Series 300/400,and process industries will boost EBIDTA/ton to INR15,300 by FY19E comparable to global standards.

Outlook and valuations: Attractive, underlying momentum to sustain; maintain ‘BUY’

We expect JSHL’s net sales/EBIDTA/PAT to grow at a CAGR of 15%/19%/46% respectively between FY17-19E We believe, higher RoCE of JSHL (22%) (even

on WACC adjusted basis)compared to European players(8-10%), burnished demand prospects and market leadership should lead to at par/premium

valuation for the company with respect to European players. We are valuing the stock at par with European listed counterparts at 7x EV/EBIDTA, yielding

value of INR289/share. Additionally, we value the company’s investments in JSL (36.5% stake) at INR41/share to arrive at target price of INR 329. We

recommend ‘BUY’ with an upside of 61% from current level.

Year to March FY15 FY16 FY17 FY18E FY19E

Revenues (INR Cr) 8,196 7,235 7,774 9,036 10,339

Rev growth (%) NA (11.7) 7.5 16.2 14.4

EBITDA (INR Cr) 741 862 980 1,131 1,383

Net Profit (INR Cr) -22.6 125.4 290 408 621

P/E (x) NA NA 16.7 11.9 7.8

EV/EBITDA (x) 7.8 7.6 7.9 6.8 5.6

RoACE (%) NA 26.3 20.0 18.6 22.0

RoAE (%) NA 6.4 38.6 37.2 38.5

Bloomberg: JSHL:IN

52-week range (INR): 211/74

Share in issue (cr): 23.6

M cap (INR cr): 4,842

Avg. Daily Vol. BSE/NSE

:(‘000) 460

Promoter Holding (%) 57.67

Coverage Stock: Jindal Stainless (Hisar) Ltd.

Embarking on a ‘stainless’ performance!

CMP INR205 Target INR 329

Rating: BUY Upside: 61%

Date: 17th October 2017

Salil Utagi

Research Analyst

[email protected]

Debashish Mazumdar

Research Analyst

[email protected]

Jindal Stainless Ltd (Hisar)


Market leadership in domestic stainless steel market with portfolio tilted towards value added products, JSHL is set to benefit out of government’s

focus on building infrastructure and overall increasing consumerism. We expect JSHL’s net sales, EBIDTA, and PAT to increase at a CAGR of 15%,

19%, and 46% respectively over FY17-19E. We are valuing the stock at FY19E EV/EBIDTA of 7x to arrive at fair value of INR 289 and valuing equity

investment in JSL at INR41. We recommend “Trading BUY” on JSHL with a target price of INR 329, upside of 61% from CMP

Market leadership in

domestic SS, diversified

portfolio, and strong

momentum in underlying

demand to drive the

volumes & profitability

Higher blended realisation

to led to OPM

improvement, further

improving return ratios

Focus on steady volume

growth with focus on value

added products will

improve profitability and

reduce deleverage

FY16 FY17 FY18E FY19E

Revenue 7235 7774 9036 10339

EBITDA 862 980 1131 1383

EBITDA Margin 11.9 12.6 12.5 13.4

PAT 125 290 408 621


RoACE (%)

(ex cash)38.5 24.8 23.0 28.0

Debt to

Equity (x)3.3 3.8 2.5 1.7

Multiple Price Target

RMTL

8x EV/EBIDTA 388

6x EV/EBIDTA 271

Entry = INR 205

EBIDTA CAGR of

19% over FY17-

FY19E to lead to exit

multiple of 7x FY19E

EV/EBIDTA

Total Return of

61%



Price Target INR 329

We value the stock at a 2 year forward EV/EBIDTA multiple of 7x at par with global players. We

recommend ‘BUY’ with a TP of INR 329

Bull

2 year forward EV/EBIDTA

multiple of 8x on FY19E

INR 388 We believe significant value accretion can happen if demand runs more than supply in India through

new infrastructure projects. Strong performance can result into a bull case multiple of 8x and price

target of INR 388, an upside of 89% from CMP

Base



INR 329 We value the stock at a 2 year forward EV/EBIDTA multiple of 7x at par with global players. We

recommend ‘BUY’ with a TP of INR 329

Bear



INR 212 Keeping the financial projections constant and valuing the stock on a 2 year forward EV/EBIDTA

multiple of 5x, the most bearish multiple for the commodity company gives target price of INR 212,

upside of just 3.5% from CMP



Average Daily Turnover (INR cr) Stock Price (absolute) Relative to Sensex, absolute (%)

3 months 6 months 1 year 1 year Since

28/01/16 5 years 10 years 1 year

Since

28/01/16 5 years 10 years

3.35 2.3 2.24 137% 437% NA NA 118% 404% NA NA

Bu

sin

ess

Va

lue

Driv

ers

Nature of Industry Stainless steel is a specialised products industry having diverse applications; ranging from widely used cookware to high grade critical

application in process industries

Opportunity Size Global market is worth $75bn while Indian market size is worth $5-5.5bn. Global market is growing at a CAGR of ~5% while Indian market

is expected to grow at 8% for the next decade

Capital Allocation Under composite scheme of arrangement, long term debt of INR2600cr was transferred to JSHL. Moreover, JSHL has INR900cr of short

term debt.

Predictability High predictability as stainless steel market has grown at ~8% CAGR during the past decade despite up and down cycle in the

economy. Govt’s focus on creating world class infra projects like metro railway, airports, and investments in process industries, lends

high predictability to the demand.

Sustainability Volume growth is sustainable due to demand from diverse industries. Pricing and profitability will follow commodity cycles

Disproportionate Future Demand of stainless steel in India can go disproportionately in the near term if govt increases investments in underlying applications by

a large factor. Moreover, increase in CVD or anti dumping duty on Chinese goods can open up large opportunity for Indian players

Business Strategy &

Planned Initiatives JSHL is focusing on steady volume growth of 11-12% with focus on value added products. Margin preservation and balance sheet de-

leveraging will also be followed

Near Term Visibility Very high near term visibility as underlying demand is very strong from infra segments. CVD on Chinese products and impact of GST on

small players, has given JSHL a big opportunity to grab market share

Long Term Visibility If India follows path of China by creating world class infrastructure assets in the next decade then the market for stainless steel will have

good long term visibility



Focus Charts – Story in a nutshell Growth in world Stainless Steel production Consumption of SS Indian consumption pattern to trend towards

global

Market Share Capacity Utilization Revenue Growth

0

10,000

20,000

30,000

40,000

50,000

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

in '000 m

etr

ic t

on

ne

s

Africa EU

Americas China

India Asia - Ex China Ex India

40

35

30

25

20

15

10

5

0

-5.0

(10,000) 10,000 20,000 30,000 40,000 50,000 60,000 70,000

Taiwan 31.8

S.Korea 26.4

Per Capita SS Consumption

Germany 14.8

USA 6.4

Japan 14.1China 9.0

Turkey 5.3

Indonesia 0.8India 1.9

Per Capita SS Consumption Flat Products

Pe

r C

ap

ita

SS C

on

sum

ptio

n(K

g/C

ap

ita

l)

80%

57%

37.8%

6.7%

11.8%

16.9%

25.4%

0.9%1.6%

10.6% 12.8%20%5.7% 7.3%

1998 2015 2023Others/Misc.

ART

Electro-Mechanical Industry

Engineering

Process Industry & Power

ABC

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

0

0.5

1

1.5

2

2.5

3

3.5

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Millio

n T

on

ne

s

Size of Indian market consumption Total Jindal Production India GDP Growth Rate

3L

4.5L

Imports

3L

4.8L

0%

20%

40%

60%

80%

100%

120%

-

2,00,000

4,00,000

6,00,000

8,00,000

10,00,000

FY15 FY16 FY17 FY18EFY19E

ton

s

Production

Installed Capacity

Capacity Utilisation (RHS)

% share of Indian market (RHS)

8,1

96

7,2

35

7,7

74

9,0

36

10,3

39

67.8% 66.4% 64.3% 64.0%63.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

-

2,000

4,000

6,000

8,000

10,000

12,000

FY15 FY16 FY17 FY18E FY19E

(IN

R

Cr)

Net revenues

RM cost as % of sales

EBITDA margin (%)



I. Stainless steel market: Overview

Stainless steel is an alloy of steel with chromium content by mass of minimum

10.5% having corrosion resistance properties and produced in induction furnace.

Along with chromium, other metals like nickel & molybdenum are added to

enhance properties like hardening, corrosion resistance, heat treatment,

machinability, etc. Stainless steel has a wide range of applications— cookware,

medical instruments, razor blades, high-end applications in seamless tubes for

process industries, thermal power, automobiles, building & construction, railways,

etc.

It has been the fastest growing metal over the past 4 decades, surpassing all the

other important metals/alloys by a significant margin.

Growth in world Stainless Steel production:

Source: ISSF (worldstainless.org)

China has dominated the production of stainless steel post 2005, enhancing its

share in global production from 13% in 2005 to 55% in 2016, as production grew

at a CAGR of 20.7%. Production of stainless steel in India clocked CAGR of 5.7%

between 2005 and 2016, while production de-grew in Japan and South Korea at

a CAGR of (2.3%) and (0.1%) respectively.

Growth of leading Metals (1980 - 2016)

Lead 2.00%

Copper 2.73%

Zinc 2.25%

Aluminium 3.80%

Carbon Steel 2.31%

Stainless Steel 5.40%



China added large capacity of stainless steel to cater to its burgeoning

demand from infrastructure, automotive and consumer products.

Between 2005 and 2016, it added 30mt capacity to account for ~50% of

global stainless steel production and consumption in 2016. Over 2005-16,

while worldwide stainless steel consumption posted 5.8% CAGR, the

consumption in China grew at a 20.9% CAGR.

China’s capacity addition spree followed by dumping of products

throughout the world has led to capacity utilisation falling below 70% in

Europe and US. Unfair dumping practice adapted by China has led to

anti dumping duty on Chinese stainless steel products across the world

including India.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

in '000 m

etr

ic t

on

ne

s

Africa EU Americas China India Asia - Ex China Ex India Other Europe

EU

16%

Other

Europe

, CIS &

Africa

1%USA

5%

Other

Americ

as

1%Asia

ex-

China

22%

China

55%

Stainless Steel Melt Shop

Production by Region - 2016

China

51%

EU

16%Other

Europe

, CIS &

Africa

3%

USA

8%

Other

Americ

as

1%

Asia Ex-

China

21%

Stainless Steel Melt Shop

Capacity by region - 2016



High supplier concentration: Leading to bargaining power

Sources: World Steel, ISSF (worldstainless.org), & Acerinox

Sources: World Steel, ISSF (worldstainless.org), & Acerinox

The stainless steel industry is far more concentrated in a few players compared

to the carbon steel industry. Top 10 players control almost 58% supply compared

to just 25% in the carbon steel market. Being a niche specialised products

industry, the number of operational plants is also less than 500 compared to

thousands of carbon steel plants across the world.

Top 10 players – JSL group’s position

Players Installed Capacity in

mn tons

1 Tsingshan, China 7.4

2 TISCO, China 4.5

3 Outokumpu, Finland 3.1

4 POSCO, South Korea 2.9

5 Acerinox, Spain 2.9

6 Baosteel, China 2.7

7 Aperam, Luxembourg 2.1

8 LISCO, China 2.0

9 JISCO, China 2.0

10 Beihei Chengde, China 2.0

13 JSL group 1.6

Source: Acerinox, Edelinvest Research

China has the highest number of large SS producers accounting for 6/10

top 10 SS producers in the world. Outokumpu, Aperam, and Acerinox are

European companies formed through multiple consolidations over last 15

years.

JSL group – JSL & JSHL combined has installed capacity of 1.6mn tons

making it the 13th largest player in the world.

Top 10

Producers

58%

Rest

42%

Concentration in the Stainless Steel Industry

Top 10

Producers

25%

Rest

75%

Concentration in Carbon Steel Industry



II. Consumption of SS – India lags behind major economies,outlook remains bright

Source: Edelweiss Investment Research

Stainless steel consumption depends upon the stage of an economy’s development as higher usage happens through use of stainless steel for infrastructure and

for aesthetic purpose by end consumers. While per capita consumption in most developed countries is more than 10kg, China’s stands at 9kg (up from 4kg in 2005).

India woefully lags developed countries and large developing countries as well with per capita consumption at mere 1.9kg. Notably, it grown to current level from

even lower level of 1.1kg in 2005.

40

35

30

25

20

15

10

5

0

-5.0

(10,000) 10,000 20,000 30,000 40,000 50,000 60,000 70,000

Taiwan 31.8

S.Korea 26.4

Per Capita SS Consumption

Germany 14.8

USA 6.4

Japan 14.1China 9.0

Turkey 5.3

Indonesia 0.8India 1.9

Per Capita SS Consumption Flat Products

Pe

r C

ap

ita

SS C

on

sum

ptio

n(K

g/C

ap

ita

l)



Stainless Steel - Global consumption pattern

Source: Company, Edelweiss Investment Research

Consumption of stainless steel through cookware, consumer goods and medical

instruments accounted for 48% of total global consumption in 2016. Demand

centres which have higher usage are primarily related to aesthetic usage in

architecture and building construction. In rapidly developing countries like China

the usage has grown rapidly in industrial applications including infrastructure and

process industries.

Indian consumption pattern to trend towards global


Over the past 2 decades, stainless steel consumption in India has moved

away from the most primary usage in cookware/durable to new value

added categories of architecture, buildings, infrastructure and process

industries. The change is following global pattern of countries where per

capita incomes of developing countries are catapulting in line with

developed countries. India’s per capita stainless steel consumption has

increased from 1.0kg in 2008 at per capita GDP of USD 1053 to 1.9kg in

2016 at a per capita GDP of USD 1700.

Consumer

Goods &

Medical,

48.00%

Chemical,

Petrochemical &

energy, 16.00%

Automotive &

heavy Industry,

10.00%

ABC &

Infrastructure,

15.00%

Industrial &

Heavy Industry,

8.00%

Others, 3.00%

2016

80%

57%

37.8%

6.7%

11.8%

16.9%

25.4%

0.9%1.6%

10.6%12.8%

20%

5.7% 7.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1998 2015 2023

Cookware & Durables ABC

Process Industry & Power Engineering

Electro-Mechanical Industry ART

Others/Misc.



Demand forecast: Strong inherent demand

Taking into consideration healthy growth in most underlying segments, stainless steel consumption in India is expected to clock 8-9% CAGR over the next decade.

•Cookware industry to grow at +12% based on volume growth expectation of Hawkins, prestige,etc

• Under penetration of consumer durables in India especially of washing machines

• Increasing no of hospitals and treatment centres t

Cookware, Consumer goods, and medical

• Demand for petrochemicals consistently growing at 6% CAGR in India leading to greenfield/brownfield capex leading to demand of high grade SS

• Investments related to BS6 standardsChemical , petrochemicals, and energy

• SS is extensively used in evironments exposed to chemicals to avoid corrosion resitance

•Under construction thermal power stations continue to drive demandProcess industry & Power

• Incrasing use of SS for aesthetic purpose in residential, commercial buildings like offices, hotels. Infra projects like metro railways, airports, bus stops driving demand for SS

Architecture, Building & Construction (ABC)

• Exhaust outlet of automobiles are made up of SS along with other critical parts

• Bodies of metro railway and buses. Higher usage of SS in new bogies /wagons of Indian Railways

Auto, Railway & Transportation (ART)



III. High correlation between raw material and stainless steel prices:

Stainless steel is an iron alloy with a minimum of 10.5% chromium. Other alloying elements such as nickel, molybdenum, titanium and copper are added to enhance

their structure and properties of formability, strength and cryogenic toughness. Non-metals such as nitrogen and carbon are also added to enhance the same

properties. Stainless steel prices are highly dependent on raw material, especially nickel, as it is one of the most expensive metals on per ton basis.

Raw material prices, especially of nickel and ferrochrome (FeCr), are added onto the base price of stainless steel as a ‘surcharge’ which is passed on to customers.

Content and pricing of Series 304 stainless steel (approx)

Nickel FeCr Total Surcharge Base price of SS Total price of SS

% content 8% 16%

Current price $12,000/ton $2200/ton

Contribution to surcharge $960/ton $352/ton $1312/ton $1000/ton $2312/ton


Price comparison of raw material and stainless steel

Final selling price of stainless steel has high correlation with prices of nickel as it constitutes minimum 40% and has accounted for 80% of stainless steel cost. Nickel

prices had a bull run over 2003-09; they peaked in 2008-09 at USD50,000/ton.

Source: APERAM, Edelweiss Investment Research

0

5000

10000

15000

20000

25000

30000

35000

Au

g-0

8

De

c-0

8

Ap

r-09

Au

g-0

9

De

c-0

9

Ap

r-10

Au

g-1

0

De

c-1

0

Ap

r-11

Au

g-1

1

De

c-1

1

Ap

r-12

Au

g-1

2

De

c-1

2

Ap

r-13

Au

g-1

3

De

c-1

3

Ap

r-14

Au

g-1

4

De

c-1

4

Ap

r-15

Au

g-1

5

De

c-1

5

Ap

r-16

Au

g-1

6

De

c-1

6

Ap

r-17

Au

g-1

7

Nickel - LME Cash (USD/t)

0

1000

2000

3000

4000

5000

Fe

b-0

8

Ju

n-0

8

Oc

t-08

Fe

b-0

9

Ju

n-0

9

Oc

t-09

Fe

b-1

0

Ju

n-1

0

Oc

t-10

Fe

b-1

1

Ju

n-1

1

Oc

t-11

Fe

b-1

2

Ju

n-1

2

Oc

t-12

Fe

b-1

3

Ju

n-1

3

Oc

t-13

Fe

b-1

4

Ju

n-1

4

Oc

t-14

Fe

b-1

5

Ju

n-1

5

Oc

t-15

Fe

b-1

6

Ju

n-1

6

Oc

t-16

Fe

b-1

7

Ju

n-1

7

Chinese versus Euopean CR 304 2B 2mm coil transaction

price*

Chinese price European price



A. Slide in nickel prices has led to higher usage of stainless in past 7-8 years

Post touching peak in 2009, nickel prices have dipped over the past 6-7 years, primarily due to mass production on nickel pig iron (NPI) in China. NPI is a low grade

ferronickel invented in China as a cheaper alternative to pure nickel for the production of stainless steel. The NPI production process utilises laterite nickel ores

containing just 4-10% nickel content instead of pure nickel.

During the commodity prices bull run over 2005-09, world stainless steel production clocked CAGR of –ve 1% while post 2009, it posted CAGR of 9.1%. On the other

hand, stainless steel production in China grew at a CAGR of 29% between 2005-09 and 16% CAGR between 2009-16.

Production process of NPI is highly polluting in nature as it releases high amount of carbon dioxide. The China government’s recent policies of curbing polluting

industries has resulted in lower imports of ferronickel from Indonesia/Philippines and increasing imports of refined nickel.

We believe, balanced production of stainless steel in China through refined nickel and NPI is the key to stable prices of nickel in the near future, which should be

conducive for healthy growth of global stainless steel production.

Chinese reduced NPI production leading to increased Ferrornickel imports

Source: Aperam

0

50

100

150

200

250

300

350

400

450

500

2013 2014 2015 2016 H1'17

(in

kt)

Chinese NPI production Ferronickel imports (Ni content)



IV. JSL group: Market leader by huge margin

Jindal Stainless (JSL) and Jindal Stainless (Hisar) (JSHL) were carved out of a single entity in April 2015 under a composite scheme of arrangement with the lenders

of the erstwhile company. Now, JSL and JSHL are operated as two different legal entities of the same promoter group.

At the combined level, the JSL Group is the market leader in domestic stainless steel production with a consistent ~40% share over the past 15 years. Of India’s

total 3.3mt capacity, the JSL Group accounts for 1.6mt, i.e., ~50% of installed capacity.

Considering India is a net exporter of only 4 lakh tons, we are considering installed capacity in India to be same as actual consumption.


Stainless Steel types – flats find higher no of applications than longs

Type of stainless

steel Available as Applications

Flat SS Sheets, plates Household products, cookware, consumer durables,

industrial applications, coins, razor blades

Long SS Bars, rods, wires, Door handles, bathroom fittings, mesh, aircraft landing

gears, medical instruments,

Currently, while flat products account for 71% of overall stainless steel consumption, long products account for balance 29%. The same ratio in case of the JSL

Group stands at 90:10. Amongst flat stainless steel producers, the JSL Group is the leading player with 60% market share. The group has limited competition in

production of flats as the only other large player is SAIL’s Salem plant with 280,000 tpa capacity. SAIL has not been able to use this capacity effectively; the plant

has been incurring huge losses for the past several years. Rest of the competition is from unorganised single location players which are highly inefficient and face

the risk of closing of operations post demonetisation and GST.

1.6

1.55

.18

1.73

Installed Capacity – 3.3 Million tons

JSL

Unorganised

Salem

Group

Flats,

71%

Longs,

29%

Production by Type



A. Journey of JSL group – Dominating the market, building incremental market share despite rising imports

Source: JSL, JSHL, Edelweiss Investment Research

Despite up-down cycles in the underlying economy during the past decade, stainless steel demand has remained strong throughout. While stainless steel

production in India posted 7.49% CAGR between FY06 and FY17, the JSL Group’s production increased at 8.84% during the same period. Thus, the company

captured incremental market share. Organised large peers which added capacities are Viraj Profiles (6 lakh tons of long products) and SAIL’s Salem plant 1 lakh

ton (to reach 2.8 lakh ton of flat products).

CVD on imports from China: Curtailing competition

Imports have registered CAGR of 17% over FY13-16 (FY17 data not available, but likely to be closer to 3 lakh tons), hurting domestic manufacturers. Almost half of

the imports were from China, which were at substantially lower prices than realistic prices.

To address this issue, in September 2017, the Government of India imposed CVD of 18% on most dumped stainless steel products from China. This is expected to

benefit market leader JSL Group substantially.

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

0

0.5

1

1.5

2

2.5

3

3.5

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Mill

ion

To

nn

es

Size of Indian market consumption Total Jindal Production India GDP Growth Rate

3L

4.5L

Imports

3L

4.8L



JSL group* capacity addition and utilisation remains strong

Source: *-JSL+JSHL,

Over the previous decade, the JSL Group has expanded capacity substantially via greenfield route in Jajpur, Odisha by adding 0.8mt (expandable up to 1mt).

Post commissioning of the Odisha plant in FY12, the group’s capacity utilisation catapulted from 50% to ~85% in FY17, indicating higher market share. The Group’s

share in the total domestic market has remained closer to 40% over the past decade.

0%

20%

40%

60%

80%

100%

120%

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Millio

n T

on

ne

s

Total Jindal Production Total Jindal Capacity Capacity Utilization % of Market Share Attributable to Jindal



B. Diversified players, no threat of direct aggressive competitors in flat products

JSHL does not have a comparable peer in the stainless steel segment. Viraj Steel is an unlisted player focusing on the segment, but only in long products. Hence, it

does not directly compete with the JSL Group. Mukand is also a player in stainless steel products, but it is present in other segments of steel alloys production as

well. SAIL has a plant in Salem dedicated to stainless steel production, but the plant is highly inefficient, incurring losses consistently. Sunflag Iron is present in the

alloy steel space and not exactly in stainless steel production.

Company Description Location Turnover EBIT

Sunflag Iron & Steel Ltd.

Sunflag Iron & Steel Ltd. is a unit of

SunFlag Group. The company

produces Carbon Steel, Alloy Steel,

Stainless Steel, etc. It has a capacity

of 3.6 L TPA

Bhandara, Maharashtra. INR 1711 Cr INR 153 Cr

Viraj Profiles Ltd.

Viraj Profiles Ltd. is an Indian

Company with operations in 90

countries and it is one of the largest

manufacturer and exporter of

Stainless Steel Long Products in the

world with capacity of 6 lakh tins

Palghar, Maharashtra INR 5692 Cr (2015) INR 685 Cr (2015)

SALEM (SAIL)

SALEM Steel Plant is a special steel

unit of SAIL with a melt shop

capacity of 2.8L TPA. It has a melt

shop, cold rolling mill and a hot

rolling mill.

Salem, Tamil Nadu INR 2032 Crores INR (112) Cr




C. Grades of SS and applications Source: Edelweiss Investment Research


Stainless steel is graded depending upon the chemical composition of chromium, nickel, molybdenum, nitrogen, etc. Due to its inherent properties of formability

and corrosion resistance, Series 300 is the most widely used grade globally, accounting for almost 54% of total usage. Applications of Series 300 vary from cookware,

medical equipment, food processing equipment to car/bus bodies, and other infrastructure applications.

Price of nickel plays a major role in determining alloy surcharge over base price of stainless steel. Nickel, even though used anywhere between 8% and16% in 300

series, has accounted for minimum 40% to maximum 80% of stainless steel prices in the past decade as the metal’s prices fluctuated between USD8000 and

USD50,000/ton.

Stainless Steel

Family Description Composition Typical Applications

Martensitic Group

400 Series

Capable of being heat treated to a wide range

of hardness and strength level

Carbon: 0.11%

Chromium: 12%

Bolts, nuts, screws, cutlery, scissors, surgical

equipment

Ferritic Group

400 series

Used for corrosion resistance and resistance to

sealing at high temperature.

Always magnetic

Carbon: 0.05%

Chromium: 16.5%

Vehicle mufflers, containers, vehicle trim, kitchen trim

and equipment, drums and tubs for washing

machine, heat exchangers, oil burner parts

Austenitic Group

200 and 300 series

Have excellent formability and corrosion

resistance

Non-hardenable by heat treating, non magnetic

in normal condition and composition.

Becomes slightly magnetic when cold rolled

Carbon: 0.04%

Chromium: 18.2%

Nickel: 8.7%

Architectural trim, vehicle wheel cover, railroad car

bodies, food processing, hospital equipment, dairy

equipment, beverage equipment, pharmaceutical

equipment

Duplex Alloys Group

Austentic-ferritic stainless steel

based on 2205 alloy, have a mixture of austentic

and ferritic in their structure, nitrogen added to

improve corrosion resistance and strength

Carbon: 0.02%

Chromium: 22%

Nickel: 5.5%

Molybdenum: 3%

Nitrogen: 0.14%

Pipe and tube applications, petro-chemical

equipment, pulp and paper processing machinery

and equipment



D. Stainless steel output by grade – Higher the value addition, better control over margins

Source: Industry

Volatility and consistently high prices of Nickel have led to the development of Series 200, especially in developing countries China and India. Nickel helps maintain

stainless steel’s austenitic structure, which can also be managed by adding manganese and nitrogen to very low content of nickel (<4%) to the alloy. Thus, Series

200 can be developed at a much lower cost for applications where corrosion resistance is not the essential criteria, in a way limiting its applications.

Series 200 accounted for as much as 70% of total consumption in India in FY08, which dipped to 57% in FY16 as usage of stainless steel grew faster and wider in the

past decade. Rising per capita incomes and development of infra/process industries/food processing units in the past decade has led to higher usage of higher

quality Series of 300 and 400.

JSL Hisar - Break up by series (volumes)

Source: JSHL

300 Series

(Austenitic)

54%

400 Series

(Ferretic &

Martensitic)

27%

200 Series

(Austentic)

18%

Duplex

1%

Global Stainless Steel Output by Grade - 2016

70%57%

23%

28%

7%14%

0% 1%

FY08 FY16

Indian production by series

200 300 400 Duplex/alloys

200

30%

300 &

Duplex/all

oys

50%

400

20%

Even though JSHL is the pioneer in developing Series 200 in India, Series 300 constitutes almost

half of its production. According to our estimate, the company, along with group company

JSL, dominates the domestic Series 300 market, accounting for as much 70% share (combined

production of 7 lakh tons of total 9 lakh tons market) in FY17. Also, JSHL has been a leading

player in indigenous production of duplex stainless steel in India, which was entirely imported

a decade ago. The company’s duplex stainless steel is extensively used in welded pipes in

refineries, thermal power plants and other process industries.

We believe, current dominant market share in Series 300 will help JSHL sustain higher than

industry EBIDTA/ton of ~INR15,300/ton in FY19E.



V. Financial Analysis

Sales per ton comparison:

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

JSL 1436 1370 2164 2220 2334 1951 2245 2166 1819 1863 2157 1663 1897

JSHL 1905 1605 1741

Acerinox 2304 3066 4280 3681 2904 3649 3974 3494 2367 2503 2020 1774

Aperam 4682 4269 2927 3219 2903 2489 2529 2048 2073 1867

Outokumpu 4052 4259 6680 5659 3536 4264 5012 4083 3465 2974 2965 2575

EUR/USD 1.202 1.256 1.371 1.471 1.395 1.326 1.392 1.285 1.328 1.328 1.110 1.106

INR/USD 43.92 45.24 41.48 43.78 48.36 45.65 45.45 53.42 58.51 61 64.12 67.17 65.25

Nickel is used in lithium ion batteries, which should lead to higher optimism on stronger prices in the near future. Due to high correlation between nickel and stainless

steel prices, historical cycles of stocking and de-stocking of stainless steel have followed nickel prices. We believe, consensus on nickel price remaining stable to

higher from current USD12,000/ton over the next 3-5 years will result in strong upcycle in stainless steel production.

EBIDTA/ton comparison in USD/ton

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

JSL 188 134 323 275 -122 345 360 1403 286 234 128 141 247

JSHL 173 196 225

Acerinox 202 539 406 124 -185 309 291 154 136 257 137 147

Aperam 598 475 156 235 228 129 169 232 239 218

Outokumpu 16 543 771 -139 -642 173 169 109 -45 114 91 140


Operating margins which are measured in terms of EBIDTA/ton have also been impacted by currency exchange rate. Post the 2008-09 financial crisis, margins have

improved from the lowest point in 2009 to a respectable USD200-250/ton for most players (except Outokumpu in FY16. In FY17, margins corrected due to

unfavourable exchange rates). We estimate operating margins of JSL and JSHL, which are predominantly domestic sector focused with high market shares &

portfolio of value additive products, to trend towards USD250-300/ton over the next 3 years.

Operating costs of Indian players are lower than European players in terms of labour and most importantly due to backward integration/assured domestic supply

of FeCr in India. We believe, further strengthening of backward integration by JSL, like acquisition of chrome ore mines in India, will led to margin expansion in the

near future.



Steady volume growth to be accompanied by margin expansion

Capacity utilizations to remain closer to 100% Strong revenue growth with improving gross margins


We expect JSHL’s volume to grow at a CAGR of 11% over FY17-19E, utilizing 100% of the capacity. The management believes the volume growth run rate of 10-15%

can be maintained with capex of INR 100-150cr in additional balancing equipments. Also, the company can always explore options of outsourcing part of the

production process either melting or rolling to others in case demand outstrips supply in the short term. Considering focus on value added products, buoyancy in

underlying commodities like nickel and chromium, and brighter demand outlook, we are incorporating 5% price hike for both FY18E and FY19E.

Thus, we expect company’s consolidated (including subsidiaries) net sales to grow at a CAGR of 15% over FY17-19E while EBIDTA margins are expected to improve

to 13.4% in FY19E compared to 12.6% in FY17. Increasing proportion of value added products is expected to led to improvements in gross margins in a sustainable

manner.

0%

20%

40%

60%

80%

100%

120%

-

1,00,000

2,00,000

3,00,000

4,00,000

5,00,000

6,00,000

7,00,000

8,00,000

9,00,000


ton

s

Production Installed Capacity

Capacity Utilisation (RHS) % share of Indian market (RHS)

8,196

7,235 7,774

9,036 10,339

67.8% 66.4%64.3% 64.0%

63.5%

9.0%11.9% 12.6% 12.5% 13.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

-

2,000

4,000

6,000

8,000

10,000

12,000


(IN

R

Cr)

Net revenues RM cost as % of sales EBITDA margin (%)



Bargaining power through market leadership has resulted in lower working capital:


JSHL continues to maintain healthy net working capital days of ~60. Higher market share in India and widespread distribution network through the subsidiary (Jindal

Steelway) have imparted bargaining power to the JSL Group, which we expect to sustain in the foreseeable future. The Group’s receivable days too have always

remained under control at around 30 days, while creditor days have been higher than 60 days throughout, going even beyond 100 days in few years.

Inventory days have remained higher than 100 as the company has to stock expensive raw material nickel for at least 2 months and finished goods for a month.

We believe, management’s cautious view in maintaining buffer of 2 months of nickel bodes well for production planning and insulating against volatile price

movement and supply deficits.

-

10

20

30

40

50

60

70

80

90

(250)

(200)

(150)

(100)

(50)

-

50

100

150

200

250

FY15 FY16 FY17 FY18e FY19e Da

ys

Da

ys

Inventory Days Debtor Days Creditor Days Cash Conversion Dats



Improving profitability and efficient asset turnover to boost return ratios Dupont Analysis

ROCE

FY17 FY18E FY19E

JSL 8.9% 11.7% 13.1%

JSHL 22.2% 20.2% 23.5%

Acerinox 5.6% 3.6% 5.9%

Aperam 10.6% 10.3% 11.1%

Outokumpu 1.57% 6.2% 7.4%


Improving profitability and lower equity base are estimated to propel JSHL’s RoE from mere 14% in FY16 to 35% in FY19. RoCE is estimated to remain above 20% for

FY18-19 as all the underlying determinants, especially margins and asset turnover, are expected to improve from FY17 levels. JSHL’s RoCE stands much higher than

European counterparts, but adjusted for cost of capital (WACC), the premium reduces to only a few percentage points.

We believe, higher RoCE (even on WACC adjusted basis), burnished demand prospects and market leadership should lead to at par/premium valuation for JSHL

with respect to European players.


Tax Burden 91% 80% 77% 77%

Interest Burden 15% 43% 60% 70%

EBIT Margin 8% 10% 10% 11%

Asset Turnover 0.88 0.90 0.99 1.06

Equity Multiplier 14.22 11.52 8.31 6.03

RoE (%) 14.0 34.8 37.2 38.5



Subsidiary companies - Improving profitability

Source: Company

Name Description Turnover (2017) PAT (2017)

Jindal Stainless Steelway Ltd.

Jindal Stainless Steelway is the service arm of Jindal Stainless and offers just-

in-time service. The company is in the business of processing and distribution

of stainless steel.

INR 1395 Cr INR 14.2 Cr

JSL Lifestyle Ltd. JSL Lifestyle covers the manufacturing of modular kitchen equipments. INR 205 Cr INR 1.0 Cr

Source: Company

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

FY15 FY16 FY17

INR

cr

Standalone Gross revnues Subsidiaries gross revenues

0

50

100

150

200

250

FY15 FY16 FY17

INR

cr

Standalone profits (excl extraord and share of associate) Subsidiaries



VI. Valuations: 2 year forward EV/EBIDTA charts

Jindal Stainless Ltd(JSL)*

European Players

OUTOKUMPU ACERINOX APERAM

*- JSHL not considered as it has history of only 3 years

Source: Bloomberg, Edelweiss Investment Research

-5000

0

5000

10000

15000

20000

Ma

r-0

3

Ju

n-0

3

Se

p-0

3

De

c-0

3

Ma

r-0

4

Ju

n-0

4

Se

p-0

4

De

c-0

4

Ma

r-0

5

Ju

n-0

5

Se

p-0

5

De

c-0

5

Ma

r-0

6

Ju

n-0

6

Se

p-0

6

De

c-0

6

Ma

r-0

7

Ju

n-0

7

Se

p-0

7

De

c-0

7

Ma

r-0

8

Ju

n-0

8

Se

p-0

8

De

c-0

8

Ma

r-0

9

Ju

n-0

9

Se

p-0

9

De

c-0

9

Ma

r-1

0

Ju

n-1

0

Se

p-1

0

De

c-1

0

Ma

r-1

1

Ju

n-1

1

Se

p-1

1

De

c-1

1

Ma

r-1

2

Ju

n-1

2

Se

p-1

2

De

c-1

2

Ma

r-1

3

Ju

n-1

3

Se

p-1

3

De

c-1

3

Ma

r-1

4

Ju

n-1

4

Se

p-1

4

De

c-1

4

Ma

r-1

5

Ju

n-1

5

Se

p-1

5

De

c-1

5

Ma

r-1

6

Ju

n-1

6

Se

p-1

6

De

c-1

6

Ma

r-1

7

Ju

n-1

7

4x 6x 8x 10x 12x JSL EV

-4000

-2000

0

2000

4000

6000

8000

10000

12000

14000

39

356

39

569

39

783

39

995

40

210

40

422

40

634

40

848

41

061

41

275

41

487

41

699

41

913

42

125

42

339

42

552

42

767

Millio

ns

4x 6x 8x

10x 12x OUTO EV

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

39

356

39

569

39

783

39

995

40

210

40

422

40

634

40

848

41

061

41

275

41

487

41

699

41

913

42

125

42

339

42

552

42

767

Millio

ns

4x 6x 8x

10x 12x ACER EV

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

40

544

40

695

40

848

41

000

41

153

41

306

41

456

41

609

41

760

41

913

42

064

42

217

42

370

42

522

42

675

42

826

Millio

ns

4x 6x 8x

10x 12x APER EV



Peer comparison with European Players:

PE PE PE PB PB PB EV/

EBITDA

EV/

EBITDA

EV/

EBITDA ROCE ROCE ROCE

FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E

JSL 94.7 29.2 18.8 2.4 2.5 2.2 8 8.4 7.6 8.9% 11.7% 13.1%

JSHL 14.2 10.1 6.6 4.6 3.2 2.1 7.9 6.8 5.6 22.2% 20.2% 23.5%

Acerinox 46.01 15.38 14.28 1.72 1.5 1.43 7.98 7.91 7.58 5.6% 3.6% 5.9%

Aperam 16.75 14.03 12.67 1.47 1.59 1.49 7.09 7.54 7.25 10.6% 10.3% 11.1%

Outokumpu 14.48 9.90 11.21 1.39 1.3 1.18 6.16 5.97 6.69 1.57% 6.2% 7.4%

Average of

European

players

25.7 13.1 12.7 1.5 1.5 1.4 7.1 7.1 7.2 5.9% 6.7% 8.1%

Source: Bloomberg, Edelweiss Investment Research

Valuations:

Company Multiple FY19e basis

Consol

EBIDTA

FY19e

EV Net Debt Market Cap

Value per

share of

JSHL (INR)

% upside

Jindal Stainless (HISAR) EV/EBIDTA 7 1383 9683 2869 6814 289 45%

Investment in associates

Holding

company

discount to

market

capital

Stake Market

Capital

Value of

JSHL's stake

Holding

company

discount

Attributable

Value

- Jindal Stainless Ltd 37% 5237 1916 50% 958 41

Target price of Jindal Stainless (Hisar) 329 61%




Composite scheme of arrangement:


Jindal Stainless Ltd

Capacity Debt

● 0.8mt hot melting shop, Odisha

● 0.8mt hot melting shop, Hisar

● Ferrochrome 2.5 lakh tpa, Odisha

● Ferrochrome 40k tpa,Vizag

● Power – 256 MW, Odisha

LT- INR 98 bn

ST –INR 40bn

JSHL

Capacity Debt

● 0.8mt hot melting shop, Hisar

● Ferrochrome 40k tpa,Vizag

LT – INR 24 bn

ST – INR 9 bn

JCL

Capacity Debt

● Coke ovenbattery of 4.3 lakh tpa

LT – INR 4.9bn

JUSL

JSL

Capacity Debt

● 0.8mt hot melting shop, Odisha

● Ferrochrome 2.5 lakh tpa, Odisha

● Power – 256 MW, Odisha

LT – INR 33 bn

ST – INR 20 bn

Capacity Debt

● Hot Strip Mill –16 lakh tpa

LT – INR 24bn

JSL shareholders received JSHL

shares in 1:1 ratio

JSHL paid INR 26bn

(Slump sale)

JSHL received 40% stake in JSL

for INR 3.8bn (receivable

outstanding)

JUSL paid INR 24bn (Slump

sale) JSL receive 26% stake

(Associate)

JCL paid INR 4.9bn (Slump sale)

JSL receive 26% stake

(Associate)



Investment and loans given to group companies:

Equity investments in JSL:

Investment Company Name Year End No of Equity

Shares

Cost of

Investments Prices as on

Current Price -

Unit Curr.

Current Value

of Investment

(INR cr)

Current / Non

Current Face Value

Jindal Stainless Ltd 201703 168,284,309 366 16/10/2017 114 1,919 Non-Current 2

Other investments/loans to JSL:

Category Amount

Non current loan to JSL # INR 485cr

Advances to JSL INR 205cr

# - we have considered non current loan of INR 485cr as investments by JSHL as it recoverable in definite time frame



Key Management

Name Age Experience Designation Qualification Other Directorship

Ratan Jindal 60 Promoter Chairman

MBA, University of Pennsylvania -

The Wharton School

Jindal Stainless

Abhyuday Jindal 28 Promoter Vice Chairman

Economics & business

management from Boston

university

Jindal Stainless

Ashok Kumar Gupta 61 35 years Wholetime director MSC electronics, MBA from MDI,

Gurgaon APL Apollo

Source: Company

In the past 3 years, there have been 2 major inductions in the top management.

a) Mr Abhyuday Jindal, joined the family business as Vice Chairman of JSL and JSHL

b) Mr Ashok Kumar Gupta, who is also Managing Director of APL Apollo Tubes Ltd, has joined the company as wholetime director. Mr Gupta has been

instrumental in making APL the market leader in ERW tubes within the space of 5 years with capacity and volume additions of more than 30% CAGR. Currently,

Mr Gupta is involved in APL only on the strategic level.

Risks and Concerns:

Business cyclicality

Raw material price volatility

Slowdown in economy

Dumping from China



Business Overview

Company Brief

Jindal Stainless (Hisar) Ltd, is part of Jindal Stainless group having 0.8mtpa capacity in Hisar, Haryana. JSHL manufactures variety of products with 50%

contribution from value added products. JSHL’s products are widely used in applications starting from cookware to industrial applications.

Business Model The company manufactures stainless steel from its facility in Hisar. JSHL has melting capacity of 0.8mtpa and ferrochrome facility of 40,000tpa.

Strategic Positioning

JSHL along with group company has been a market leader in India for past 30 years with long term relationships with customers and pre-

qualifications most of the leading applications in India. JSL group has been driving force behind development of stainless steel industry in

India, giving it unparallel advantage over other players.

Competitive Edge

JSHL has 30 years of experience in the field with bouquet of products in the value added range. JSHL derives 50-70% of its revenues from high

value added range controlling 60-70% market share in the space. The company’s long term relationships with the customers and suppliers

gives company edge over smaller competitors

Financial Structure

JSHL has undertaken long term debt of INR 2600cr as part of composite scheme of arrangement, making debt to equity at 3.8x. Adjusted for

loans given to JSL, net debt to equity stands at 3.2x. Given the strong profitability profile and operating cash flow generation in next 2-3 years,

debt repayments should not pose a challenge

Key Competitors No large competitor in flats products except for the risk of imports from China. Long products which is just 10% of company’s volumes faces

competition from Viraj and Mukand

Industry Revenue Drivers Increasing penetration of cookware and consumer durables. Investments in infrastructure like metro rail, bus transport, airports, railway

coaches, process industries, etc

Shareholder Value

Proposition

We believe volume of 11% CAGR in FY17-19E would be accompanied by margin expansion to 13.4% in FY19E from 12.6% in FY17. We are

valuing the stock at EV/EBIDTA of 7x at par with European players due to its market leadership status in India coupled with strong growth of

market. We are valuing the investment in JSL at INR 41, to arrive at a fair value of INR 329, an upside of 66% from the current levels.



Financials

Income statement (Consolidated) (INR cr)


Income from operations 8196 7235 7774 9036 10339

Direct costs 6396 5426 5635 6607 7506

Employee costs 181 176 176 210 219

Other expenses 1059 947 1159 1297 1450

Total operating expenses 7455 6373 6794 7905 8956

EBITDA 741 862 980 1131 1383

Depreciation and amortisation 313 305 285 300 311

EBIT 428 557 695 831 1072

Interest expenses 475 493 431 355 350

Profit before tax -1 89 328 528 804

Provision for tax 5 7 117 185 281

Core profit -6 82 211 343 523

Extraordinary items 17 -44 28 0 0

Profit after tax -23 127 240 343 523

Share from associates 0 -1 50 65 98

Net profits (incl share of associates) -23 125 290 408 621

Equity shares outstanding (mn) 23.1 23.1 23.6 23.6 23.6

EPS (INR) basic 0.5 1.6 12.3 17.3 26.3

Diluted shares (Cr) 23.1 23.1 23.6 23.6 23.6

EPS (INR) fully diluted 0.5 1.6 12.3 17.3 26.3

Div idend per share 0.0 0.0 0.0 0.0 0.0

Div idend payout (%) 0.0 0.0 0.0 0.0 0.0

Common size metrics- as % of net revenues


Operating expenses 91.0 88.1 87.4 87.5 86.6

Depreciation 3.8 4.2 3.7 3.3 3.0

Interest expenditure 5.8 6.8 5.5 3.9 3.4

EBITDA margins 9.0 11.9 12.6 12.5 13.4

Net profit margins (0.3) 1.7 3.7 4.5 6.0

Growth metrics (%)


Revenues (11.7) 7.5 16.2 14.4

EBITDA 16.3 13.7 15.4 22.3

PBT (6,268.3) 267.2 60.8 52.2

Net profit 57.3 156.6 62.4 52.2

EPS (1,484.2) 667.3 40.7 52.2

Balance sheet (INR Cr)

As on 31st March FY15 FY16 FY17 FY18E FY19E

Equity share capital 46.2 46.2 47.2 47.2 47.2

Reserves & surplus 501 563 846 1,254 1,875

Shareholders funds 547 609 893 1,301 1,922

Long term borrowings 48 1,212 2,435 2,245 2,050

Short term borrowings 988 781 932 980 1,132

Total Borrowings 1,036 1,993 3,367 3,225 3,182

Deferred Tax Liabilit ies 23 23 67 67 67

Sources of funds 1,607 2,625 4,327 4,593 5,171

Gross block 3,085 3,118 3,268 3,410 3,510

Depreciation 385 669 929 1,230 1,541

Net block 2,700 2,449 2,339 2,180 1,969

Capital work in progress 29 61 42 0 0

Total fixed assets 2,730 2,509 2,381 2,180 1,969

Other non current assets 65 227 544 544 544

Investments 370 369 418 418 418

Inventories 1,449 1,221 1,716 1,784 2,052

Sundry debtors 954 837 1,050 1,151 1,327

Cash and equivalents 14 23 14 83 414

Loans and advances 90 103 81 92 106

Other current assets 529 248 485 485 485

Total current assets 3,406 2,801 3,763 4,014 4,802

Sundry creditors and others 4,580 2,897 2,307 2,088 2,080

Provisions 14 15 54 57 64

Total CL & provisions 4,594 2,913 2,361 2,145 2,144

Net current assets -1,188 -112 1,403 1,869 2,658

Uses of funds 1,607 2,625 4,327 4,593 5,171

Book value per share (INR) 24 26 38 55 81

Cash flow statement


Net profit -23 125 290 408 621

Add: Depreciation 313 305 285 300 311

Add: Misc expenses written off 0 6 8 0 0

Add: Deferred tax 23 -0 44 0 0

Gross cash flow 313 436 626 708 932

Less: Changes in W. C. -111 67 397 459

Operating cash flow 547 559 312 473

Less: Capex 84 157 100 100

Free cash flow 463 402 212 373

Ratios 0


ROAE (%) – 6.4 38.6 37.2 38.5

ROACE (%) – 26.3 20.0 18.6 22.0

ROACE (%) (ex -cash) – 38.5 24.8 23.0 28.0

Debtors (days) 85 40 51 50 50

Current ratio 0.6 0.8 1.4 1.6 2.0

Debt/Equity 1.9 3.3 3.8 2.5 1.7

Inventory (days) 190 86 128 120 120

Payable (days) 202 76 122 100 90

Cash conversion cycle (days) 74 49 57 70 80

Debt/EBITDA 1.4 2.3 3.4 2.9 2.3

Adjusted debt/Equity 1.9 3.2 3.8 2.4 1.4

Valuation parameters


Diluted EPS (INR) 0.5 1.6 12.3 17.3 26.3

Y-o-Y growth (%) – 244.7 667.3 40.7 52.2

CEPS (INR) 13 17 23 30 40

Diluted P/E (x) 441.3 128.0 16.7 11.9 7.8

Price/BV(x) 8.7 7.8 5.4 3.7 2.5

EV/Sales (x) 0.9 1.1 1.0 0.9 0.7

EV/EBITDA (x) 7.8 7.6 7.9 6.8 5.6

Diluted shares O/S 23.1 23.1 23.6 23.6 23.6

Basic EPS 0.5 1.6 12.3 17.3 26.3

Div idend yield (%) 0.0 0.0 0.0 0.0 0.0



Edelweiss Broking Limited, 1st Floor, Tower 3, Wing B, Kohinoor City Mall, Kohinoor City, Kirol Road, Kurla(W)

Board: (91-22) 4272 2200

Vinay Khattar

Head Research

[email protected]

Rating Expected to

Buy appreciate more than 15% over a 12-month period

Hold appreciate between 5-15% over a 12-month period

Reduce Return below 5% over a 12-month period

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Jindal Stainless (Hisar) Sensex

Disclaimer


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Edelweiss Broking Limited ("EBL" or "Research Entity") is regulated by the Securities and Exchange Board of India ("SEBI") and is licensed to carry on the business of broking, depository services and related activities. The business of EBL and its

associates are organized around five broad business groups – Credit including Housing and SME Finance, Commodities, Financial Markets, Asset Management and Life Insurance. There were no instances of non-compliance by EBL on any matter

related to the capital markets, resulting in significant and material disciplinary action during the last three years. This research report has been prepared and distributed by Edelweiss Broking Limited ("Edelweiss") in the capacity of a Research

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