Jindal Stainless capacity expansion supports growth despite fuel and import pressures

Investment View and Valuation

Motilal Oswal Financial Services maintains its Buy view on Jindal Stainless. The broker believes the recent share-price correction offers an attractive risk-reward opportunity in India’s largest stainless steel producer. The company has more than 50% of India’s domestic stainless steel capacity and generates over 90% of its volumes domestically.

Motilal Oswal considers concerns related to fuel-cost inflation, nickel-supply uncertainty, imports and export barriers to be largely priced in. It expects the company’s capacity additions and downstream expansion to provide strong earnings visibility.

At the report CMP of Rs 739, Jindal Stainless traded at 9 times FY28E EV/EBITDA and 2.3 times FY28E price-to-book value. The broker’s Rs 910 target price is based on 11 times FY28E EV/EBITDA, implying 23% upside.

The target calculation comprises target enterprise value of Rs 761 billion, net debt of Rs 12 billion and equity value of Rs 748 billion. The broker also highlights the company’s relatively clean balance sheet, with net debt to EBITDA of 0.8 times in FY26 and an estimated 0.2 times by FY28E, supporting funding for the proposed Maharashtra stainless steel project.

Capacity Expansion and Downstream Growth

Jindal Stainless commissioned a 1.2 million tonne per annum stainless steel melt shop in Indonesia through its joint venture with Tsingshan. Jindal Stainless has a 100% offtake agreement for the Indonesian output, which is intended to be processed in India. The project raises consolidated melt capacity to 4.2 million tonnes per annum.

To support the additional melt capacity, the company plans to commission a 0.17 million tonne per annum cold-rolling annealing and pickling line and a 1.1 million tonne per annum hot-rolling annealing and pickling line at Jajpur by the second quarter and fourth quarter of FY27, respectively.

A further Rs 900 crore investment at Hisar and Kharagpur is expected to be commissioned by the second quarter of FY28. This would raise total cold-rolling annealing and pickling capacity to 2.67 million tonnes per annum, or approximately 65% of melt capacity.

The broker expects the Indonesian nickel pig iron and melt-shop joint ventures, downstream acquisitions and capacity additions to improve raw-material security, support volume growth and increase the value-added-product mix.

Volume and Earnings Outlook

Management has guided for sales volume of about 3.5 million tonnes by FY29, implying an approximately 11% CAGR from FY26. Motilal Oswal estimates volume of about 3.1 million tonnes in FY28E, representing a 10% CAGR from FY26.

Fuel Costs and Margin Outlook

The key near-term operational issue is higher external fuel costs and gas availability. Jindal Stainless’ scrap-based electric arc furnace route depends on propane, LPG and natural gas, unlike integrated steelmakers that have access to internal blast-furnace or coke-oven gas.

Strait of Hormuz-related shipping disruption and the Middle East conflict raised fuel prices and affected operations in April 2026. Management said fuel availability had improved materially from the April 2026 exit and did not foresee a major future availability constraint.

Management is diversifying fuel use through greater natural-gas consumption at Jajpur, evaluating coal-gasification and syngas solutions in East India, and expanding green-hydrogen capacity.

Management’s fourth-quarter FY26 commentary indicated that the cost headwind could limit first-half FY27 EBITDA to Rs 18,000–20,000 per tonne. Motilal Oswal views normalisation of the disruption as a potential upside to management’s Rs 21,000–22,000 per tonne FY27–FY28 guidance.

Domestic Pricing and Stainless Steel Demand

Domestic stainless steel prices were trading at a 9–10% discount to China landed import parity because exemptions from mandatory BIS certification for selected products were extended until March 31, 2027.

Motilal Oswal expects this pressure to ease as the quality-control-order exemption expires and anti-dumping duties are finalised. Lower nickel prices and expected Chinese production cuts during July–August 2026 could also support pricing.

The broker forecasts domestic stainless steel consumption to rise to about 7.3 million tonnes by FY31 at an 8% CAGR. Growth is expected to be driven by infrastructure, railways, metros, airports and process industries.

Key Risks

• Sustained import pressure and delayed policy action.
• Volatile nickel and fuel costs.
• Gas-supply disruption.
• Uncertainty in export markets arising from trade tensions and conflicts.