0812-014-Jindal Stainless(JSL)-29.Dec.08

 

Stock Watch – JSL Ltd. (0812-014) – 29 Dec 2008

Stock

JSL Ltd. (Jindal Stainless Ltd)

Sector

S. Steel

Market

India

Ref No

0812-015

Symbol

JSL / 532508

Web site

www.jindalstainless.com    

Date

08-12-28

 Price 08/12/28

33.70*

Target ST

53

Target LT

120

52W High

241.00

52W Low

26.35

 ST Hold

9M

LT Hold

18M

Current PE

2.10

% Down Peak

– 89%

Downside

-15%

Upside

+250%

PE 2009

2.80 est.

Div Yield% CMP

6.25%

Buy Range

28.5~39

Sell  Range

41~49 ST

 Comments

SUMMARY: The largest private sector fully integrated manufacturer of Stainless Steel in India. Already on expansion leg to manufacture another 0.8 MPT (Million Per Ton) in Orissa. This is a 5000 Cr. Company which will expand by 20% in next two years in volume. In value terms, there may be growth depending on volatile Nickel prices which is a major input in value terms. (4% to 10% in volume). The use of Stainless Steel is expanding from traditional households to sanitary, public utilities such as Bus stands (they already received major contract in Delhi), outer façade of modern buildings, and even passenger coaches in trains.POSITIVE: Low equity of 16 Cr shares for a company that will have Rs 6000 Cr revenue in one year or cool Rs 375/shr. Operating margin may expand this year due to almost 20% reduction in cost input. Presuming 16% GP and 6% NP the EPS could reach Rs 22. The stock trading at Rs 33.70 discounts 1.5 times prospective PE in growth industry. Low interest rates, low fuel costs, lower Nickel in due to Russian Ruble devaluation (helps keep lower Nickel prices, Russia is a major producer), higher demand due to Infrastructure rates, make this stock appealing. JSL Financial – Annual

NEGATIVE: Loss in sequential quarter (reason not known). War with Pakistan, Election in May 2009 and prolonged recession may cause Stainless Steel dumping in India. CAUTION: Dilution effect due to Warrants and FCCB outstanding not considered as the figures are not available with me.).

VERDICT: A rare industrial stock that could multiply 5 times (400% return). The current dividend yield 6.5% (Rs 2 on CMP Rs 33.70) equals to bank deposits. Dividend yield may increase, not reduced. Fund raising at today’s price is ruled out, unless the main shareholders want to grab more shares.

Stock Behavior

It moves when the Jindal stable moves (like any other major group). Relatively less liquid. Trades often below 100K. If volume >200K on upside it goes higher. If exceed >10 lakhs on upside, it may make major move. Metal prices and movement in other Jindal stock determine its behavior Reduce position, if you are a trader, if the stock moves down on volume of 200K or more.

SWAP

If you own the following stocks or slow movers, you may sell them to raise the cash and Buy the above stock.

SELL

Any stock Rs 60 to 300, and if you are losing 30% or more

Cr

 

BUY

Above counter in the ratio of Selling stock price /CMP of JSL

Dr

 

Decision Reviewed on (Date YMD) due to material events later: (for future use)

 

Authored by  Kalidas  Hong Kong, (Ref: 0812-012) of 2008/12/29   *= CMP was intra day

 Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

(required)

(required)