JSW Steel gets back its lustre in Q1; safeguard duty provides support
Prices haven't recovered fully. While blended realization at ₹64,500 per tonne is up about ₹3,300 from the lows in Q4FY25, it is about 8% down year-on-year.
The Indian steel industry got a push after the imposition of safeguard duty in April, which led to a notable 34% sequential drop in imports in Q1. JSW's sales grew by 9% to 6.7 million tonnes, with domestic volumes up by 12%. The management expects sales to reach 29.2 mt in FY26, up 13% year-on-year, backed by strong domestic outlook.
While prices moderated in July with lower construction activity, the outlook is better.
'Domestic steel prices bottomed out in mid-July and should recover post-monsoon," Nuvama Institutional Equities said in an 18 July report. It projects JSW's FY26 Ebitda growth at 47%, aided by higher volumes, prices and lower raw material costs.
Among sectors, consumer appliances and automotive saw robust growth of 27% and 20%, possibly in anticipation of a sales pick-up in the upcoming festive season. Also, the US business reported positive Ebitda against a loss in the previous year, thanks to 18% volume growth and higher realization. Yet, with 4% contribution to total volumes, its impact on consolidated financials was limited.
Expansion projects
JSW is undertaking significant capital expenditure towards capacity expansion and backward integration projects to leverage strong domestic demand. The 5 million tonne per annum (mtpa) expansion at Vijayanagar will likely provide incremental Ebitda of about ₹1,500 per tonne with higher operational efficiency. Besides, the commissioning of three iron ore mines this year would help it achieve 40% raw material security against 36% in FY25.
JSW's total domestic capacity is expected to reach 41.9 mtpa from the current 34.2 mtpa, with the commissioning of the Dolvi phase III expansion and other smaller projects by September 2027. The FY26 capex plan is ₹20,000 crore, up from ₹14,700 crore in FY25. Still, strong cash flows helped JSW reduce its net debt-to-Ebitda to 3.2x in Q1 from 3.34x in Q4FY25.
The stock trades at an enterprise value of 9.4x FY26 estimated Ebitda, near its five-year average, Bloomberg data shows. Post-monsoon price trends and a volume ramp-up should provide further cues for the stock.
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