Motilal Oswal estimates the transaction at attractive valuations, pegging BPSL's FY28 Ebitda at Rs 45 billion. The brokerage reiterates a Buy rating on JSW Steel with a target price of RS 1,350, implying an 18% upside from the current market price of Rs 1,144.
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Motilal Oswal Report
The restructuring and joint venture collectively will allow JSW Steel Ltd. to monetize a significant portion of the value created through the turnaround of BPSL. This will allow JSW Steel to reduce debt and focus on the long-term growth plan of expanding capacity to 50mtpa.
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JFE Steel Corporation already holds ~15% equity stake in JSW Steel. Through this restructuring, promoter holding will increase by 1.42% to 46.74%.
At Rs 530 billion of EV and FY28E Ebitda of Rs 45 billion for BPSL, this transaction appears to be executed at decent valuations from JSW Steel's perspective.
We remain positive on the company outlook, estimating double-digit revenue growth in FY26/FY27, driven by the ramp-up of new capacity and price recovery.
Further, as input costs are expected to remain soft, we believe Ebitda margin will rebound to 18-19% in FY26/FY27 (~RS 12,000/tonne in FY26E and ~Rs 13,500/t in FY27E) on account of domestic steel price recovery, led by safeguard duty.
The recent development will support JSW Steel's deleveraging plan. Its net debt-to-Ebitda ratio declined to 2.97x as of Q2 FY26, which we expect to decline to 1.7x by FY27E, supported by robust operating profit.
At current market price, JSW Steel trades at 8.4x FY27E EV/Ebitda. We reiterate our Buy rating on the stock with a target price of Rs 1,350 (premised on 9x EV/Ebitda on Sep'27 estimate).
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