JSW Steel capacity expansion and value-added mix underpin earnings recovery
JSW Steel Ltd.
Buy
₹1,274
₹1,268
₹1,520
19.31%
Investment View and Earnings Recovery
Motilal Oswal Financial Services' June 16, 2026 company update on JSW Steel retains its Buy view. The recommendation is supported by the company's capacity expansion, improving balance-sheet flexibility following the BPSL transaction, growing value-added product mix and greater raw-material integration.
The broker expects new capacity, strong domestic demand and steel-price recovery supported by the definitive safeguard duty to support earnings over FY27-FY28. Input-cost volatility remains relevant, although structural cost initiatives are expected to improve earnings resilience over time.
Capacity Expansion and Capital Allocation
JSW Steel has existing steel capacity of 32 MTPA, excluding joint ventures, and is targeting 50 MTPA by FY31. Key projects include:
- Dolvi expansion: Capacity is expected to increase from 10 MTPA to 15 MTPA, involving capex of about Rs 21,000 crore and targeted for completion by September 2027.
- Kadapa electric arc furnace: The 1 MTPA facility involves capex of Rs 3,800 crore, is targeted for commissioning by FY29 and is intended to strengthen the long-products portfolio while providing decarbonisation optionality.
- Utkal greenfield expansion: The 5 MTPA project includes two 8 MTPA pellet plants, a 5 MTPA blast furnace, a 6 MTPA steel melting shop and a 6 MTPA hot strip mill. Completion is targeted by FY30.
Planned investment of about Rs 1.3 lakh crore over four to five years covers Odisha Phase I, Dolvi Phase III, downstream value-added products, mining and renewable energy. Funding is expected from internal accruals, Rs 32,000 crore of BPSL proceeds and disciplined leverage management.
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Premiumisation and Value-Added Products
Value-added and special products represented about 62% of volume in Q4 FY26, providing an additional earnings driver. At Vijayanagar, downstream projects include a 0.4 MTPA continuous galvanising line for high-strength automotive grades, targeted for June 2028, and a 0.55 MTPA CRNO electrical-steel plant, targeted for March 2028.
Tinplate, galvanised and galvalume additions, along with electric arc furnace-based green-steel projects, should progressively increase the high-value product share and strengthen margins as downstream facilities are commissioned.
Raw-Material Integration, Logistics and Renewables
Management has reiterated a target of around 50% captive iron-ore integration by FY31, compared with around 40% currently. Incremental supply is expected from three Karnataka mines, at around 4 million tonnes from Q1 FY27, and Goa mines, at around 3.7 million tonnes across FY26-FY27.
JSW Steel operates 13 of 25 mines and has a resource base exceeding 1.7 billion tonnes, excluding exploration assets. For coking coal, the company has secured Jharkhand blocks with 2.2 MTPA capacity, increased its Illawarra Metallurgical Coal stake to 30% with about 1.2 MTPA offtake, and is pursuing Minas de Revuboè in Mozambique.
Management expects nearly 10 MTPA of captive coking-coal availability by FY31. The first production phase at the Mozambique asset is targeted by mid-calendar year 2028, with around 5 MTPA of usable coking coal. A 302-km, 30 MTPA slurry pipeline and the 30 MTPA Jatadhar Port are targeted by FY27.
Renewable capacity stood at about 1 GW in FY26, while the Board has approved 2.5 GW plus 320 MWh of battery storage.
Earnings Estimates
Motilal Oswal's estimates exclude BPSL in FY27-FY28 because BPSL was transferred to the JFE joint venture through a slump sale. The broker's key forecasts are:
| Metric | FY27E | FY28E |
|---|---|---|
| Sales volume | 28.6 million tonnes | 31.3 million tonnes |
| Net realisation | Rs 67,259 per tonne | Rs 68,160 per tonne |
| EBITDA per tonne | Rs 13,066 | Rs 14,524 |
| Revenue | — | Rs 2,13,000 crore |
| EBITDA | — | Rs 45,400 crore |
| Adjusted PAT | — | Rs 21,400 crore |
Valuation and Target Price
The target price of Rs 1,520 is based on a sum-of-the-parts valuation. This includes FY28E EBITDA of Rs 45,400 crore valued at 8.5 times EV/EBITDA, net debt of Rs 28,500 crore and Rs 60 per share for joint-venture investments.
At the report CMP of Rs 1,274, JSW Steel traded at 7.5 times FY28E EV/EBITDA.
Key Sensitivities
- Steel-price recovery
- Input-cost volatility
- Capacity ramp-up
- Execution of raw-material, logistics and downstream projects
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
