Jindal Steel capacity ramp-up and slurry pipeline savings support earnings growth

Investment View and Valuation

ICICI Direct Research’s July 27, 2026 result update maintains a BUY rating on Jindal Steel with a target price of Rs 1,220, compared with the current market price of Rs 1,060. The broker expects profitability to improve as new capacity ramps up, supported by capacity-led volume growth, a richer value-added product mix, cost optimisation and favourable domestic steel demand.

The target price is based on 9 times FY28E EV/EBITDA. Jindal Steel currently has crude steel capacity of 15.6 million tonnes per annum, iron ore-making capacity of about 15 million tonnes per annum and finished steel capacity of about 13.75 million tonnes per annum.

Q1 FY27 Financial Performance

Jindal Steel reported a stable but muted Q1 FY27 performance. Consolidated operating income increased 26 per cent year on year to Rs 15,482 crore, supported by steel sales volume of 2.23 million tonnes, which rose 17 per cent year on year.

Average blended realisation increased by about Rs 7,526 per tonne sequentially to Rs 69,427 per tonne. The improvement was aided by safeguard-duty-led higher spot prices and a greater contribution from value-added products, which increased to 66 per cent from 61 per cent in Q4 FY26. The flat-to-long steel mix moved to 53:47 from 52:48 in Q4 FY26.

Steel Prices and Cost Pressures

Management indicated that HRC prices rose about Rs 7,000 per tonne sequentially in Q1 FY27, while TMT rebar prices increased about Rs 4,500 per tonne. However, HRC prices subsequently softened by about Rs 800 per tonne from Q1 averages, and TMT prices corrected nearly Rs 8,000 per tonne amid monsoon-related weakness.

Profitability was constrained by a higher coking coal cost of US$23 per tonne, iron ore inflation of about Rs 500 per tonne, negative operating leverage of about Rs 2,000 per tonne and West Asia conflict-related freight costs of US$12-13 per tonne. Management expects coking coal costs to rise by a further US$12-15 per tonne in Q2 FY27.

Capacity Expansion and Volume Growth

Jindal Steel is executing an approximately Rs 47,000 crore capital-expenditure programme through FY28. More than half of this investment is allocated to Angul Phase II. Commissioning of the 3 million tonnes per annum BOF-2 has increased crude steel capacity to 15.6 million tonnes per annum.

A newly commissioned 1.2 million tonnes per annum cold rolling mill is expected to increase the flat-product share to about 70 per cent from about 50 per cent. ICICI Direct forecasts a sales-volume CAGR of about 15 per cent over FY26-28E.

Management has retained FY27 production guidance of 11-11.5 million tonnes and sales-volume guidance of 10.5-11 million tonnes. Annual growth capex of Rs 8,000-10,000 crore is expected to focus on specialty products and downstream integration. Separately, a memorandum of understanding with the Jharkhand government contemplates an additional 2.5-3 million tonnes per annum of upstream steelmaking capacity.

Cost Optimisation and Earnings Outlook

The broker expects commissioning of the 18 million tonnes per annum slurry pipeline and port linkage in Q2 FY27 to generate about Rs 700 per tonne of savings. Jindal Steel has about a 50 per cent captive coal mix, with additional benefits expected from the ramp-up of Utkal B1 and production from Utkal B2.

ICICI Direct expects EBITDA per tonne of about Rs 11,721 in FY27E and Rs 13,316 in FY28E as the 6 million tonnes per annum Angul expansion improves operating leverage.

Despite the estimate cuts, the broker forecasts FY26-28E sales and PAT CAGR of about 22 per cent and 47 per cent, respectively. The reductions in FY27E and FY28E EBITDA and PAT estimates reflect margin pressure.

Key Risks

• A sharp decline in domestic steel prices could pressure profitability and earnings.
• Delays in ramping up new capacity could impair the company’s medium-term volume targets.