Jindal steel and Power Ltd. shares are expected to be in focus during Friday's trading session following a revised analyst note from Kotak Securities that highlights both near-term challenges and long-term opportunities for the steel manufacturer.

Target Price Revision Details

Kotak Securities has adjusted its financial outlook for JSPL, reducing the target price while maintaining confidence in the company's fundamental prospects. The key changes include:

Steel Sector Challenges

The brokerage firm's decision stems from immediate market headwinds affecting the steel industry. Steel prices have particularly softened during the third quarter of FY26, creating a challenging operating environment for steel manufacturers. This pricing pressure is expected to impact JSPL's financial performance in multiple ways:

• Earnings Impact: Continued pressure on steel prices may weigh heavily on the company's short-term earnings
• Margin Compression: The emerging pricing environment could put additional pressure on JSPL's profit margins
• Revenue Concerns: Softer commodity prices may affect overall revenue generation in the near term

Long-Term Growth Drivers

Despite near-term headwinds, Kotak Securities remains optimistic about JSPL's long-term prospects, citing several growth catalysts:

Capacity Expansion Plans

The company has multiple capacity additions lined up that could serve as significant growth drivers. These expansions are expected to:

Market Performance and Outlook

JSPL's stock performance reflects the mixed sentiment surrounding the steel sector. The company has delivered modest returns to investors, with shares generating approximately 6% returns on a year-to-date basis. The revised target price of ₹1,150.00 suggests Kotak Securities sees potential upside of around 15% from current levels.

Upcoming Catalysts

Investors will be closely monitoring JSPL's third-quarter earnings results to assess how the ongoing pricing pressure in the steel sector has affected the company's financial performance. The earnings report will provide crucial insights into the company's ability to navigate current market challenges while positioning for future growth through its capacity expansion initiatives.

Jindal Steel shares declined 0.9% to ₹1,003.60 on Wednesday following Nuvama's price target revision, though the brokerage maintains its optimistic long-term outlook for the steel manufacturer.

Revised Price Target and Rating

Nuvama has reduced its price target for Jindal Steel from ₹1,400 to ₹1,264 per share, representing a 9.7% cut. Despite this downward revision, the brokerage retains its "buy" rating on the stock, with the new target still implying a significant upside potential of 24.8% from the previous closing price.

Near-Term Challenges Expected

The steel sector faces a challenging environment with dual pressures impacting profitability. Nuvama highlighted that JSPL confronts a "double whammy" of declining steel prices coupled with rising production costs, which is expected to weaken steel spreads in the near term.

The brokerage anticipates that steel spreads will bottom out during the third quarter, suggesting the worst of the current downturn may be contained to this period.

Long-Term Growth Prospects

Despite near-term headwinds, Nuvama remains confident about JSPL's growth trajectory. The company's existing capacity positions it well for substantial expansion, with the brokerage projecting a robust 17% compound annual growth rate over FY25-28.

The anticipated recovery in steel prices is expected to drive EBITDA growth at an impressive 28% CAGR during the same period.

Revised Financial Estimates

Nuvama has adjusted its EBITDA projections downward to reflect the challenging pricing environment:

However, the brokerage expects significant margin expansion in the outer years, with EBITDA per tonne projected to increase by ₹3,000-4,000 in FY27 and FY28 compared to FY26 levels. This improvement is attributed to higher volumes, better price realisation, and cost reduction initiatives.

Stock Performance

Jindal Steel shares have demonstrated resilience in 2024, gaining 7% year-to-date despite the recent decline. The stock's performance reflects investor confidence in the company's long-term prospects amid cyclical industry challenges.