JSW Infrastructure: 3 key reasons why analysts expect more than 20% upside for the stock

JSW Infrastructure Ltd share price , that gained more than 2% on Friday are up more than 50% since listing in October. The strong outlook for port and logistics sector adds to JSW Infrastructure’s outlook leading to gains.

Analysts maintain positive ratings and their target price indicate more than 20% upside.

With an increasing portfolio analysts at Motilal Oswal Financial services estimate 19% volume CAGR over FY23-26 for JSW Infrastructure. This as per them should drive a 21% CAGR in revenue and a 25% CAGR in EBITDA. Cash flow generation should remain strong despite acquisitions as per analysts. Hence they have a buy rating with target price of ₹300 for JSW infrastructure.

Recently analysts at BNP Paribas also have initiated coverage of JSW Infrastructure with an “Outperform” rating. Their target price for JSW Infrastructure at ₹305 is similar to ₹300 target price given by MOFSL indicating almost 25% upside for the stock. As per BNP Paribas, JSW Infrastructure is a play on Indian steel demand, without the accompanying commodity price risks.

Growing port infrastructure and rising third party contracts aid outlook.
JSW Infrastructure installed cargo handling capacity in India expanded by a CAGR (compound annual growth) of 15.2% between FY21 and FY23, from 119.2 MTPA to 158.4 MTPA . They stood at 170 MTPA at the end of December 23 as per MOFSL data.

As strategic location of posts benefit, acquisitions too are strengthening its outlook, Taking into account steady growth levers at its current ports and terminals, a larger and rising proportion of outside clients analysts at Motilal Oswal believe that JSW Infrastructure’s focus on strategic acquisitions, increasing share of third-party customers and long-term contracts with JSW Group companies should boost its growth prospects going ahead.

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JSW Infrastructure is being expected to solidify its market leadership too thanks to steady growth levers at its current ports and terminals.

Strong steel demand to help support growth –

Based on the existing cargo mix, two reasons as per BNP Paribas that are associated with the growth of JSW Infrastructure include (a) Growing demand for steel in India is driving up demand for raw material logistics; b) Iron ore exports and thermal coal movement for coastal power plants. Given that JSW Steel is in itself concentrated on increasing steelmaking capacity to 50 mtpa (million tonne per annum) by FY31 from 28 mtpa in 3QFY24, BNP Paribas believes both of the above mentioned trends can strengthen over FY24–30 .

Coastal Coal and LNG movement to support growth
Growth in Paradip port for JSW Infrastructure may be fueled by the increase in coastal coal movement, which is likely to increase to 64 million tons in FY30 from 28 million tons in FY22, as per BNP Paribas estimates Growth in third party volume is likely to be driven by both coastal coal and expansion into the liquids market.

Besides the acquisition of PNP Port (in Raigarh district, Maharashtra) by JSW should help further increase third party volumes. JSW Infra having obtained a Container train operator license, may one day allow it to change into a major participant in integrated logistics, said BNP Paribas.

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In doing so, JSW Infra may be able to take advantage of inland logistical opportunities within the organization.

BNP Paribas while expects growth to also be supported by coastal coal and liquids. They model acquisition driven growth at 16% ROCE as low leverage supports organic and inorganic growth.

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