JSW Steel Q2FY27 volumes set to rise as deleveraging and captive raw materials support margins

Investment View and Valuation

Anand Rathi Research maintained its BUY rating on JSW Steel in its July 18, 2026 result update, with a target price of Rs 1,480. The constructive view is based on expected sequential volume recovery in Q2FY27E, strong balance-sheet deleveraging, rising captive raw-material integration, capacity expansion and favourable domestic steel-demand prospects.

The broker values JSW Steel at 9.5x FY28E EV/EBITDA, below its five-year average multiple of 10.2x. The current market price cited in the report is Rs 1,237.

Q1FY27 Performance Exceeded Estimates

JSW Steel’s Q1FY27 consolidated performance exceeded Anand Rathi’s estimates. Sales volume was 6.3 million tonne versus the broker estimate of 6.2 million tonne. Consolidated revenue rose 9.8 per cent year-on-year to Rs 47,364 crore, while average selling price was Rs 75,782 per tonne, 10.4 per cent above the broker estimate.

Adjusted for the BPSL demerger, average selling price increased 5.9 per cent year-on-year and EBITDA per tonne rose 19.5 per cent.

Volume Recovery and Domestic Demand Outlook

Management expects Q2FY27 volume to improve sequentially following the upgrade of BF-3 at Vijayanagar to 4.5 million tonne capacity and improved production at Ohio after the caster-upgrade shutdown, particularly in API grades. Management retained FY27 production and sales-volume guidance of 29.75 million tonne and 28.6 million tonne respectively.

Anand Rathi estimates consolidated sales volume of 28.6 million tonne in FY27E and 31.4 million tonne in FY28E, and expects Q2FY27E volume to be above 6.7 million tonne. The broker believes JSW Steel is positioned to benefit from domestic steel consumption, which rose around 8.3 per cent year-on-year to 41.6 million tonne in Q1FY27 and is expected to reach 175 million tonne in FY27E.

Profitability and Product Mix

Near-term profitability faces pressure from coking-coal costs, which rose by US$17 per tonne in Q1FY27. Management expects a further increase of US$12–15 per tonne in Q2FY27. Realisations excluding auto are expected to remain under pressure, although lower iron-ore prices should partly offset raw-material inflation.

Anand Rathi believes the company’s product mix offers some protection. Flat steel represents 77 per cent of volume, while value-added products account for 61 per cent of volume. The broker retained its FY27E and FY28E average selling-price estimates at Rs 72,947 and Rs 71,599 per tonne respectively.

Deleveraging and Capacity Expansion

Balance-sheet improvement is a major support for the investment case. JFE transferred its final Rs 7,875 crore tranche in June 2026, reducing net debt to Rs 46,157 crore and leverage to 1.46x in Q1FY27 from 3.2x in Q1FY26. The company has set a leverage cap of 2.5x.

JSW Steel plans to expand installed capacity from 37.9 million tonne currently to 54.8 million tonne in FY30E and 79.5 million tonne, including joint ventures, by FY32E. Key projects include:

• The 5 million tonne Dolvi Phase III expansion.
• A 1 million tonne electric-arc-furnace expansion at Kadapa.
• Capacity additions at Vijayanagar and Utkal.
• A 302-km, 30 million tonne slurry pipeline from Odisha mines to Jagatsinghpur, expected to commence in FY27.

The slurry pipeline could deliver logistics savings of around Rs 1,000 per tonne on planned transport of around 20 million tonne.

Captive Raw-Material Integration

Raw-material integration is another expected margin driver. JSW Steel plans to operationalise three Indian coking-coal mines by FY28, supplying around 2.5 million tonne. Australian assets could contribute around 1.9 million tonne of PLV coking coal, while Minas de Revuboè could contribute around 5 million tonne by FY29E.

Together with the 2 million tonne Dugda washery, these assets could meet around 22–25 per cent of coking-coal requirements in FY28E and around 50 per cent by FY31E. Captive iron-ore sourcing is expected to rise from around 30 per cent currently to 50 per cent by FY31E.

Estimate Revisions and Key Risks

Anand Rathi raised its FY27E and FY28E estimates as follows, chiefly reflecting lower finance costs:

Key risks are delays in capex execution, slower enhancement of raw-material integration and commodity-price volatility.