Jindal Stainless shares rise 200% from 52-week low; is price correction in offing?

Shares of stainless steel maker Jindal Stainless Ltd rose over 5% amid a rally in the broader market today. Jindal Stainless shares gained 5.51% to Rs 301.4 against the previous close of Rs 285.65 on BSE. They hit a 52 week high of Rs 329 on March 8. With today’s rise, the stock has climbed 217% or Rs 206 from its 52-week low of Rs 95.05 hit on June 20, 2022. The stock has been gaining for the last two sessions. The stock of the stainless steel maker has gained 25.44% this year and risen 139% in the last one year. Total 1.18 lakh shares of the firm changed hands amounting to a turnover of Rs 3.48 crore on BSE. Market cap of Jindal Stainless rose to Rs 24,377 crore.  

In terms of technicals, the relative strength index (RSI) of Jindal Stainless stands at 51.5, signaling it's trading neither in the overbought nor in the oversold zone. Jindal Stainless stock has a one-year beta of 1, indicating average volatility during the period. Jindal Stainless shares are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

The stock of the firm has gained 7% since Q4 and annual earnings were announced on May 17 this year. Jindal Stainless reported a 20% fall in net profit to Rs 716.29 crore in the March 2023 quarter. However on a quarter-on-quarter basis, the firm reported a 40% rise in profit from Rs 512 crore in the December quarter. The metal firm’s board approved a proposal to raise Rs 5,000 crore via issue of debt securities. On May 18, Jindal Stainless shares gained 8.42% to Rs 303.95 against the previous close of Rs 280.35 on BSE.

The New Delhi-based company's revenue from operations climbed to Rs 9765.08 crore in Q4 from Rs 9725.91 crore a year earlier. Sales zoomed 9% to Rs 35,697 crore in the last fiscal against net profit of Rs 32732 crore in the previous fiscal.  However, profit fell 33% to Rs 2083.83 crore in FY23 against Rs 3109.39 crore in the previous fiscal.

The Board of Directors recommended a final dividend payment of Rs 1.50 for FY23 to the shareholders on account of improved financial performance, taking the total dividend payment to Rs 2.50 i.e. 125% per equity share with a face value of Rs 2 each.

Commenting on the outlook of the stock, Gaurav Bissa, VP, InCred Equities said, "Jindal Stainless has been in a strong uptrend since 2020 and has been forming higher highs and higher lows. The stock has been in a strong outperformer among Metal as well as Midcap space. The stock witnessed a 5-year ascending trendline breakout in early 2023 and enjoyed a swift upside. It has been consolidating for the last few weeks and has made a retest of the 5-year breakout.  The stock is comfortably trading above its short-term as well as long-term moving averages suggesting the trend remains strong and it can witness a strong upside going forward. The stock has a strong support at Rs 260 levels and is expected to test Rs 340 levels in the coming weeks."

Osho Krishan, Sr. Analyst - Technical & Derivative Research, Angel One said, "Jindal Stainless has been in a secular uptrend and is hovering above all its major EMAs (Exponential Moving Averages) on the daily chart. At present, the stock is placed near the stiff resistance of the Rs 300 level, and a decisive breakthrough could only trigger the next leg of rally in the comparable period. On the flip side, a series of support can be seen from the Rs 280 to Rs 270 zone with a bullish undertone."

Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said, "The stock has resisted near the Rs 305 zone on thrice occasions witnessing strong barrier and would need a decisive above that zone. Currently, the support is maintained near Rs 275 zone below which the trend would turn negative and expected for further slide. Overall the stock is moving sideways, and a breach of Rs 305 zone would take it to the near-term target of Rs 330 levels."

Abhijeet from Tips2trade said, “Average Q4FY23 results somewhat muted by a significant drop in promoter holding doesn't augur well for long term prospects of Jindal Stainless which faces strong resistance at Rs 304 on the Daily charts. A close above this resistance could lead to targets of Rs 321-330 in the near term. Support will be at Rs 280."

ICICI Direct expects the stock to hit Rs 350 in a year.

“Jindal Stainless share has given a return of 94% in the last one year (from Rs 147 in May 2022 to Rs 285 in May 2023). We maintain our BUY rating on the stock . We value JSL at Rs 350, 6x FY25E EV/EBITDA,” said the brokerage.

Key triggers for the future price performance according to the brokerage are: “Going forward, for JSL’s standalone operations, we assume EBITDA/tonne of | 19000/tonne for both FY24E as well as FY25E. Going forward, we assume sales volumes of 2.1 MT for FY24E and 2.4 MT for FY25E. Over FY23-25E, we expect the topline to grow at a CAGR of 14% while EBITDA, PAT are expected to register CAGR of 13%, 16%, respectively.”

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