The stock of Jindal Steel and Power has been rising for the past few days. On Monday, the shares touched a new 52-week high of ₹125.5 and closed up 7.03 per cent on the NSE. The stock has more than doubled in the past one year.

The company was out of investors’ list of favourite stocks. Its performance was affected mainly by the cancellation of allotment of captive coal blocks by the Supreme Court, which had a direct impact of ₹3,300 crore as additional levy, and total impact of ₹5,000 crore after considering interest and costlier coal, according to Antique Stock Broking.

‘Worst is behind’

However, analysts met the management recently and reckon that the company is now out of the woods. Consequently, they feel that the rise in the stock price will continue. Prabhudas Lilladher has put a target price of ₹150 on the stock, which implies a return of 20 per cent from Monday’s close of ₹124.8. “The worst is behind the company and the company is set for a strong turnaround,” it said.

Motilal Oswal has upgraded the stock rating to ‘buy’ and also raised its target price to ₹180 (44 per cent upside potential).

All the three businesses of the company are expected to remain on a strong footing, going ahead. Commencement of new capacity at Angul will help growth of the steel business in terms of volumes and price (recent price rise, anti-dumping duties). Prabhudas Lilladher expects 80 per cent increase in domestic steel production in FY18.

Further, the company’s power business is best positioned in case of a pick-up in demand due to its competitive capital cost and improved utilisation. The company’s subsidiary Jindal Power will benefit from the start of the new power purchase agreement with Uttar Pradesh State Electricity Board in the first quarter of FY18. The overseas mining business will benefit from ramp-up of coal production and rebound seen in international coal prices.

While all the above three would lead to higher operational cash flows, leverage levels are expected to decline as incremental capex requirements are likely to be lower in future.

The company has guided for capex of ₹1,500 crore in FY18, which is expected to come down to ₹800 crore in FY19. Jindal’s consolidated net debt stood at ₹46,300 crore as on December 31.

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