Morgan Stanley maintains 'hold' on Jindal Steel & Power

RESEARCH: MORGAN STANLEY

RATING: HOLD

CMP: Rs 640

Morgan Stanley upped its target price to Rs 666 but maintained its ‘Hold’ rating on Jindal Steel & Power (JSPL). Although JSPL’s growth trajectory is steepening for both its power and steel businesses, its array of projects remain high-return Morgan Stanley doesn’t find much upside from the current levels. According to MS, the company is among the best-positioned steel companies with 100% self-sufficiency in iron ore and growing proportion of value-added products.

Steel business EBIDTA is expected to grow at a CAGR of 31% with volume CAGR of 16% over 2010-2013E. The EBIDTA growth estimates for next two years have been upped following a higher forecast for steel prices, jump in JSPL’s pellet production from Orissa plant, commissioning of Jharkhand steel project and a 1350-MW power plant.