Hold JSW Steel; target of Rs 1064: Prabhudas Lilladher

Prabhudas Lilladher's research report on JSW Steel

We recently met the management of JSW Steel to gain insights into domestic steel demand and the company’s initiatives to improve margins. Newly commissioned 5mtpa at JVML has been ramping up well over the last few months. Brownfield Phase III 5mtpa expansion at Dolvi is on track to be commissioned by Sep’27, while in the near term, BF#3 at Vijayanagar is expected to undergo planned 6-month shutdown to upgrade capacity by 1.5mtpa by end of FY26. With another 0.5mtpa debottlenecking, JSTL would reach 36.4mtpa by FY26E. We expect JSTL to continue to capture market share as domestic demand improves aided by GST rationalization. JSTL remains India’s fastest growing steel producer with its superior execution capabilities. Over the last 5 years, its VASP volumes improved from 7.2mt to 15.4mt while its India crude steel capacity grew at 14% CAGR to 34.2mtpa – highest amongst peers.

Outlook

We expect JSTL to deliver strong 26% EBITDA CAGR over FY25-28E on a low base. At CMP, the stock is trading at 8x/7.4x EV on FY27/28E EBITDA. We maintain ‘HOLD’ rating with revised TP of Rs1,064 (Rs1,068 earlier), valuing the company at 7.5x EV/Sep’27E EBITDA (rolling forward from Mar’27).