JSW Steel: Expansion, margin revival drive Motilal Oswal to reiterate 'Buy'

MOFSL on JSW Steel: Backed by a bold capacity expansion strategy, improving cost dynamics, and signs of a pricing rebound in the domestic market, JSW Steel has caught the attention of Motilal Oswal Financial Services (MOFSL), which has reiterated its ‘Buy’ rating on the stock with a target price of ₹1,180.

 

On the bourses, around 9:20 AM, JSW Steel share price was trading 0.21 per cent higher at ₹1,031.45 per share. In comparison, BSE Sensex was trading flat with a positive bias at 82,641.95 levels.

 

The brokerage believes the stage is set for a strong turnaround in JSW Steel's margins and earnings, aided by both internal efficiencies and macro tailwinds. 

 

 

Over the next three years, JSW Steel is pumping in ₹60,000 crore to boost its steelmaking and downstream capabilities, taking domestic capacity to 42 million tonnes per annum (mtpa) by September 2027 in Phase I - a 17 per cent jump. A further rise to 50mtpa is on the cards under Phase II, pending board approval.

 

“We believe the ramp-up of newly added capacity will drive robust volume growth and support a ~10 per cent CAGR over FY26–27E,” MOFSL noted, underlining how strategic commissioning at steady intervals could anchor long-term growth.  Track Stock Market LIVE Updates

 

What also strengthens JSW’s outlook, according to the brokerage, is its intense focus on cost optimisation and raw material security. The company plans to meet 50 per cent of its iron ore requirement from captive sources by FY26 and is leveraging both domestic and overseas coal assets to curb import dependence. “With 50 per cent iron ore self-sufficiency targeted by FY26 and captive coal assets overseas, JSTL is well-positioned to mitigate input cost volatility,” MOFSL added.

 

JSW is also increasing its renewable energy (RE) integration - with 996 MW already commissioned and another 1,470 MW in the pipeline - while simultaneously investing in logistics infrastructure to slash freight expenses.

 

Premiumisation is another key pillar of the strategy. The value-added special product (VASP) segment contributed 62 per cent of sales (ex-JSW Vijayanagar Metallics Limited) in FY25, and the company is scaling up investments in this high-margin category. 

 

“The continued thrust on downstream product lines and new verticals like defense and railways further adds to our confidence in margin resilience,” the report noted.

 

Although Ebitda per tonne fell to ₹8,659 in FY25 from ₹11,395 a year ago, largely due to cheap imports, a reversal is likely ahead. “With input costs expected to remain soft and steel prices likely to rebound on safeguard measures, we forecast margins to rebound to 18-19 per cent in FY26/27, translating to ₹12,000–13,500/t Ebitda,” MOFSL said.

 

The brokerage estimates cash flow from operations at ₹62,000 crore over FY26–27E, which should comfortably fund the company’s ₹35,000 crore expansion plan and enable deleveraging. “We estimate the net debt-to-Ebitda ratio to fall to 1.7x by FY27E, driven by robust operating profits and disciplined capital allocation,” it stated.

 

At 7.6x FY27E EV/Ebitda, the stock remains attractively valued, MOFSL said, as it reaffirmed its bullish stance: “We reiterate our Buy rating with a target price of ₹1,180, based on 8.5x FY27E EV/Ebitda.”