Indian Steel Stocks Could See FY26 Earning Estimates Upgrade On Potential Import Duty

The Ministry of Commerce and Industry's investigative arm, the Directorate General of Trade Remedies, has recommended imposition of provisional safeguard duty on certain steel imports.

This recommendation was long awaited by the Indian steel industry, which has been hurt by cheap Chinese steel imports for the past two years. If imposed, steel stocks like Tata Steel Ltd., JSW Steel Ltd., Steel Authority of India Ltd. and Jindal Steel & Power Ltd. could get an earnings upgrade to their FY26 earning estimates, according to Rajesh Ravi, institutional research analyst at HDFC Securities.

Safeguard Duty Recommended

The Directorate General has recommended to levy a 12% safeguard duty on imports of flat steel products for 200 days. This includes products like hot rolled coils, sheets, cold rolled coils and sheets, and more.

While the initial recommendation of the Indian steel industry stood at 25%, analysts stated that any duty over 5% would be positive for the space. The recommended 12% stands well between the 10-15% range expected by brokerages.

Impact Of The Safeguard Duty

The move would be a big positive for Indian steel players and will protect them from cheap Chinese steel imports.

Imposition of the safeguard duty would price Indian steel at a Rs 2,297 per tonne discount to the landed cost of Chinese steel imports of India, according to PhillipCapital. In the absence of the safeguard duty, Indian steel prices stand at a Rs 3,152 per tonne premium over Chinese imports.

Nuvama Research as well as JPMorgan also note that the imposition of the safeguard duty would allow Indian companies to take a price hike of Rs 2,000 to Rs 2,500 per tonne. This would help companies' margins as well capex investments.

Earnings Upgrade On The Cards

JPMorgan expects a complete flow through of the pricing benefit to the Ebitda of steel companies. The brokerage also sees a scope for the consensus, as well as its own Ebitda estimates for steel players to be revised upwards for fiscal 2026.

HDFC Securities echoed this view. Ravi expects upgrade for steel sector in the next three to six quarters. A 1% improvement in sales realisations (due to the potential price improvement) can lead to a 5% change in Ebitda, he said.

JPMorgan assumes an incremental Rs 2,000 per tonne average selling price benefit due to the duty recommendation. This could drive an 11% overall FY26 Ebitda increase for Tata Steel and a 16-17% increase for counters like JSW Steel and Steel Authority of India.

Morgan Stanley had expected a 10-15% safeguard duty, with SAIL expected to see a 20-40% upgrade to its FY26 Ebitda estimates, while JSW Steel was expected to see an upside of 15% to 28%.