In its latest research, Prabhudas Lilladher has issued a “HOLD” recommendation for JSW Steel, reflecting a narrative of impressive volume growth and resilient operating performance amidst softer steel prices and evolving sector dynamics. The report underscores a substantial capex plan, robust expansion progress, and strong demand tailwinds, yet maintains a measured stance due to price-related pressures and sectoral uncertainty. Investors should note both the strategic achievements and risk factors, paying close attention to the revised target price and detailed operating metrics. This comprehensive analysis sets the stage for informed decisions in a transforming steel landscape.

Strong Operating Performance Powered by Volume Gains

JSW Steel’s consolidated volumes grew a noteworthy 20% year-over-year, bolstered by robust domestic demand and accelerated ramp-up at JVML. The company’s capacity utilization at Indian operations stood at an impressive 92%, highlighting its operational prowess. Value-added and special product (VASP) sales surged 20%, touching 4.31 million tons, driven by steady expansion and ramp-up across plants.
Exports delivered a significant uptick, rising 69% year-over-year in volume, with international share of sales increasing to 10%. JVML alone contributed a 6.3% quarter-over-quarter jump, reflecting successful furnace ramp-up initiatives and strategic market realignment.

Price Weakness Controls Realization Despite Volume Strength

Consistent volume growth was offset by a 4.6% sequential decline in average consolidated realizations, attributed to weaker steel prices in both flats and longs during the monsoon quarter. This price softness exerted pressure on net sales realization, which fell to Rs 61,515 per ton, registering a 5% year-on-year drop.
Despite price headwinds, raw material costs and fuel expenses declined, leading to healthier profit margins and cost competitiveness. Declining coking coal prices and optimized product mix supported elevated profitability metrics.

Profitability Surges on Cost Optimizations and Volume Wins

JSW Steel reported a stellar 44% year-over-year growth in consolidated EBITDA, reaching Rs 78.5 billion for the recent period. EBITDA per ton leapt 20.6% to Rs 10,693, underscoring operational efficiency despite softer realizations.
Cost-saving measures led to reduced raw material and power/fuel costs per ton, while mining premium costs also dipped 33%. These factors, combined with strategic volume expansion, contributed to a margin expansion and elevated profitability.

Ambitious Capex Agenda Positions Company for Future Growth

JSW Steel is embarking on a transformative capex program valued at Rs 690 billion, targeting extensive capacity upgrades and green technology enhancements over the next 3.5 years starting H2FY26. Major initiatives include the Kadapa EAF project (completion expected by FY29), plant expansions at Raigarh and Salem, Dolvi Phase III progress, and commissioning of India’s first large-scale green hydrogen electrolyser. The company aims to increase renewable energy usage and battery storage, aligning with sustainability objectives.
Board approvals for additional manufacturing projects and infrastructure upgrades reinforce the company’s proactive approach to capturing future demand. This includes a planned boost in crude steel output, with expansions aligned to government infrastructure spending and industry-wide GST-driven enthusiasm.

Financial Snapshot and Key Metrics

Below is a snapshot capturing the financial essence and valuation of JSW Steel:

Financial metrics reflect robust growth, improving margins, and healthy return ratios, yet a cautious valuation is warranted due to sector volatility and pricing risks.

Target Price, Investment Levels, and Analyst Perspective

Prabhudas Lilladher maintains a “HOLD” rating for JSW Steel, revising the target price to Rs 1,118 from a previous Rs 1,151, giving the stock a valuation at 8x EV/Sep’27E EBITDA. At the current market price near Rs 1,166, JSW Steel trades at 9x/7.6x EV FY27/FY28E EBITDA, indicating limited upside and justification for a measured approach. Investors are advised to consider accumulation only on material weakness or price corrections.
Support levels are identified at Rs 1,120, with resistance anticipated near Rs 1,180. For investors, trading strategies should be aligned to these levels while monitoring sectoral cues and government policy changes impacting demand. Sustained margin improvement and capex execution will be key drivers for future re-rating.

Key Risks and Sectoral Dynamics

Downside risks include further steel price softening, rise in coking coal costs, and adverse global demand trends. Domestic policy shifts or delays in infrastructure projects could exert downward pressure on volumes and realizations.
Conversely, expected extension of safeguard duty, GST-led demand resurgence, and strategic plant upgrades offer tailwinds for fundamental improvement. Improved export performance and regulatory support are pivotal factors that could buoy investor sentiment in the mid-term.

Strategic Expansion Tempered by Price Volatility

JSW Steel’s journey—marked by substantive volume growth and pointed capex investments—is a testament to the group’s industry leadership. However, sector-wide price headwinds and capex execution risks continue to cast shadows of uncertainty, justifying Prabhudas Lilladher’s prudent HOLD stance. The revised target of Rs 1,118 serves as a benchmark for cautious investors, with support/resistance levels providing tactical reference points for trading and accumulation. Watch for evolving policy moves, market sentiment, and execution pace that will define JSW Steel’s next phase of growth.