JSW Steel Ltd. reported June-quarter earnings that exceeded most analysts' estimates on the operating front, helped by higher steel realisations and resilient margins despite a seasonally weak quarter and lower sales volumes.
Brokerages said the company's earnings were supported by better pricing, while lower debt and progress on expansion projects strengthened the medium-term outlook. Most expect production and sales volumes to improve in the coming quarters as the BF-3 blast furnace resumes operations after its expansion and new capacity ramps up.
The company's consolidated EBITDA rose despite a sequential decline in revenue, while net profit fell sharply from the previous quarter because the March quarter included a one-time gain of Rs. 17,888 crore.
JSW Steel Q1 Highlights (Consolidated, QoQ)
- Revenue fell 7.5% quarter-on-quarter to Rs. 47,364 crore from Rs. 51,180 crore.
- EBITDA rose 8.7% to Rs. 9,383 crore from Rs. 8,634 crore.
- EBITDA margin improved to 19.8% from 16.9%.
- Profit declined 71.6% to Rs. 4,651 crore from Rs. 16,370 crore.
- Q4 FY26 included a one-time gain of Rs. 17,888 crore.
Operationally, quarterly production stood at 6.59 million tonnes, while steel sales reached a record 6.25 million tonnes for any first quarter, rising 4% year-on-year. Exports increased 46% and accounted for 11% of Indian sales. Capacity utilisation, excluding BF-3, stood at 94%.
The company spent Rs. 4,869 crore on capital expenditure during the quarter and retained its FY27 capex guidance of Rs. 22,000 crore to Rs. 24,000 crore. It also completed the expansion of the BF-3 blast furnace from 3 million tonnes per annum to 4.5 million tonnes per annum, which is expected to add incremental volumes from the second quarter.
Separately, JSW Steel said it will participate in the proposed JSW One Platforms IPO by selling shares worth up to Rs. 811 crore. JSW One contributed about 0.35% of the company's consolidated profit after tax.
Here's what brokerages are saying after JSW Steel announced Q1 results
Morgan Stanley
- Maintained 'Overweight'
- June-quarter EBITDA beat both its estimate and Bloomberg consensus despite weaker volumes.
- Attributed the earnings beat to stronger steel realisations and better cost control.
- Said the BF-3 shutdown weighed on volumes, but expects production to improve from Q2 as the expanded furnace resumes operations.
- Noted the share of value-added products increased, supporting better pricing.
- Said coking coal costs remained elevated but lower iron ore prices should provide some relief in the coming quarters.
- Highlighted that net debt declined after the BPSL slump sale proceeds were received.
- Retained its constructive view on the stock, citing volume growth, lower leverage and sustained domestic steel demand.
Jefferies
- Maintained 'Buy' with a target price of Rs 1,650
- Said June-quarter EBITDA was about 20% above its estimate due to stronger steel realisations.
- Raised FY27-FY28 earnings estimates by 1%-4%.
- Increased FY26-29 EBITDA estimates as it expects sustained earnings growth.
- Expects Asian steel spreads to expand as Chinese exports remain subdued and Indian exports recover.
- Said domestic steel prices should remain broadly stable during FY27.
- Expects coking coal costs to rise in Q2 before easing in subsequent quarters.
- Said expansion projects remain on track to lift capacity to 80 million tonnes by FY32.
Citi
- Maintained 'Buy' with a target price of Rs 1,510
- Said first-quarter EBITDA per tonne likely peaked on stronger realisations.
- Expects EBITDA to soften in Q2 because of higher coking coal costs.
- Forecast profitability to recover from Q3 as raw material costs moderate.
- Said domestic volumes should improve after BF-3 resumes operations.
- Highlighted management's confidence in maintaining leverage below 2.5 times debt-to-EBITDA.
- Said upside from China remains limited given weak demand and excess capacity.
Goldman Sachs
- Maintained 'Buy'; target price raised to Rs 1,525 from Rs 1,500
- Said consolidated EBITDA exceeded its estimate despite weaker domestic demand.
- Credited stronger overseas operations for the earnings beat.
- Raised FY27-FY28 EBITDA estimates by about 3%-5%.
- Increased the target price to Rs. 1,525 from Rs. 1,500 after factoring in lower debt.
- Expects production and sales volumes to recover in the second half as BF-3 ramps up.
- Said lower leverage and capacity additions strengthen the medium-term outlook.
JPMorgan
- Maintained 'Overweight' with a target price of Rs 1,500
- Said stronger pricing, rather than volumes, drove the earnings beat.
- Expects steel spreads to come under pressure in Q2 because of higher coking coal costs before recovering from Q3.
- Raised FY27-FY29 earnings estimates by 1%-2%.
- Said capacity expansion projects remain on schedule and should support volume growth.
- Expects the slurry pipeline to lower iron ore transportation costs from the second half of FY27.
- Highlighted improved leverage and management's commitment to keeping net debt-to-EBITDA below 2.5 times despite higher capital expenditure.
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