Buy JSW Steel; target of Rs 1200: Motilal Oswal

Motilal Oswal's research report on JSW Steel

JSTL reported consolidated revenue of INR432b (flat YoY and -4% QoQ), in line with our estimate of INR429b, as healthy NSR was offset by weak QoQ volume growth. Steel sales volumes stood at 6.69mt (+9% YoY and -11% QoQ), impacted by planned shutdowns at Dolvi and BPSL, while ASP stood at INR64,500/t (-8% YoY and +8% QoQ), led by price recovery. EBITDA stood in line with our estimate at INR75.8b (+38% YoY and +19% QoQ). EBITDA/t improved to INR11,324/t in 1QFY26, up 26% YoY and 33% QoQ (vs our est. of INR10,440/t). The improvement in EBITDA was driven by better NSR and lower coking coal costs. APAT stood at INR21.8b (+159% YoY and +43% QoQ; vs. our estimate of INR20b), aided by better operating profitability during the quarter. Consolidated crude steel production stood at 7.26mt (+14% YoY and -5% QoQ), impacted by planned maintenance shutdowns. Capacity utilization at Indian operations stood at 87% in 1QFY26 vs. 93% in 4QFY25. Institutional and retail sales volumes were higher 12% YoY. Domestic sales stood at 5.96mt, marking a 12% YoY increase, while exports fell 20% YoY and accounted for 7% of sales from Indian operations during 1QFY26.

Outlook

At CMP, JSTL trades at 7.6x FY27E EV/EBITDA, and we largely maintain our FY26/FY27 EBITDA estimates. We reiterate our BUY rating on the stock with a TP of INR1,200 (premised on 8.5x EV/EBITDA on FY27 estimate).

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