Morgan Stanley bullish on JSW Steel with 'Overweight' call, sees 18% upside

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JSW Steel stock: International brokerage Morgan Stanley has initiated a tactical call on the JSW Steel stock with an 'Overweight' rating and a target price of ₹1,300, suggesting an upside potential of 18 per cent from Monday, September 8, closing price of ₹1,101 on the NSE.

 

The stock is expected to outperform the broader market over the next 60 days, the brokerage said. 

 

At 2:00 PM, shares of JSW Steel were trading at ₹1,105.5, up 0.37 per cent from the previous day's close. In comparison, the benchmark NSE Nifty50 index was trading 0.34 per cent higher at ₹24,857 levels. The market capitalisation of the company stood at ₹2.7 trillion. The stock's 52-week high was at ₹1,112.3 and its 52-week low was at ₹880. 

 

Analysts at Morgan Stanley believe that India's steel industry is at the start of a spreads expansion cycle, with domestic steel prices expected to expand as demand improves incrementally, China anti-involution playing out, and global macro factors turning favourable. 

 

Additionally, there is potential upside if the safeguard duty is extended. In this context, JSW Steel is well-positioned to benefit due to its significant domestic presence and focus on flat steel products, supported by expanding margins from higher HRC prices and robust volume growth. The stock is expected to perform well despite its premium valuations, the brokerage said.

 

“We estimate that there is about an 80 per cent-plus (or ‘highly likely’) probability for the scenario,” the brokerage added.

 

In its bull case, Morgan Stanley expects a supportive global macro environment, boosting steel prices and volumes in the medium term, further backed by the high chances of safeguard duty extension. In the bear case, weaker demand-supply conditions or lower steel prices could weigh on performance. It estimated the cost of equity at 12 per cent, terminal ROE at 15 per cent, and terminal growth at 3 per cent in this scenario.

 

Domestic demand and company volume growth, improving ahead of expectations, could lead to higher steel prices. Additionally, a faster project ramp-up would further support positive momentum.

 

On the other hand, weaker-than-expected prices or volume momentum pose a downside risk. There is also a risk of delay in the commissioning of new capacity. Furthermore, higher-than-expected iron ore costs from auctioned mines could negatively impact margins.

JSW Steel Q1 results

In the April-June quarter for fiscal 2025-26 (Q1FY26), the company reported revenue from operations of ₹43,147 crore, marginally up from ₹42,943 crore in the year-ago period. Its operating earnings before interest, tax, depreciation and amortisation (Ebitda) stood at ₹7,576 crore in Q1FY26, up 37.5 per cent from ₹5,510 crore in the same quarter of the previous fiscal. The company's profit after tax (PAT) grew almost 1.5 times to ₹2,209 crore in the reported period from ₹867 crore in the year-ago period.