Update on the Indian Equity Market:
On Tuesday Nifty closed 0.3% higher at 10,799. Among the sectoral indices, Pvt Bank (+2.7%), IT (+2.1%), and Bank (+1.9%) closed higher. Metal (-1.7%), Realty (-0.7%), and FMCG (-0.4%) closed lower. Bajaj Finance (+7.8%), IndusInd Bank (+5.9%) and Bajaj FinServ (+4.5%) closed on a positive note. Adani Ports (-3.5%), PowerGrid (-3.0%) and Grasim (-2.9%) were among the top losers.
Excerpts from an interview of Mr Sajjan Jindal, Chairman, Jindal Group with ET Now dated 6th July 2020:
- Speaking about the current economic scenario he said the June GST collection of Rs 90,000 crore gives a good indication. The auto industry is sluggish and is operating at about 30-35% level from a production perspective.
- October this year could be better than last October.
- For steel products, domestic demand is about 50% of the capacities which is about 50-60 million tonnes for the year. By the end of the year, it is expected to go to the normal level, which is 110 million tonnes.
- The steel industry in India is balancing the current situation by exporting steel to different parts of the world. Therefore, steel companies in India are running at close to 90% capacity.
- There should not be any control over imports and exports. But when it comes to China, the country has not behaved properly with India.
- The steel companies buy refractories from China for steel making and it is one of the important ingredients for manufacturing steel. The company buys 90% material from China, but there are plans to bring down the dependence on China and focus on domestic manufacturing or exports from other countries.
- In the beginning, there will be a pain as Indian supplies are going to be expensive. The company will work with Indian producers and the emerging markets to bring down the cost and improve the quality.
- The group has given clear instructions that they will not import any material directly from China which is close to $400 million.
- The industry has to come together to support the army and government and automatically this will go a long way in developing the Indian industry.
- On Coal Import, he said India does not have good quality metallurgical coal needed for manufacturing steel. So, the company have to import that. The group cannot be 100% self-reliant on everything. But importing manufactured products is not a great idea. So the industry should be developed.
Consensus Estimate: (Source: market screener websites)
- The closing price of JINDALSTEL was ₹ 156/- as of 07-July-2020. It traded at NM/20 x the consensus earnings per share estimate of ₹ -6.3/7.8 for FY21E/ FY22E respectively.
- The consensus average target price for JINDALSTEL is ₹ 176/- which implies a PE multiple of 23x on FY22E EPS of ₹ 7.8/-
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