JSW Steel Q3 review: Volumes steady, margins pressured; outlook diverges

Brokerages delivered a mixed but nuanced assessment of JSW Steel’s Q3FY26 performance and outlook, balancing steady volume growth and capacity expansion plans against near-term margin pressures from weak steel prices and rising coking coal costs.

 

On the bourses JSW Steel share price rallied up to 4.01 per cent to an intraday high of ₹1,216.30 per share, nearing its 52-week high of ₹1,223.75. Around 11:05 AM, JSW Steel share price was trading 2.46 per cent higher at ₹1,198.40 per share. By comparison, BSE Sensex was trading 0.33 per cent lower at 81,268.92 levels.

 

Q3FY26 performance: Volumes hold up, margins soften

 

JSW Steel reported a largely in-line Q3FY26 performance, with consolidated adjusted Ebitda of ₹6,620 crore, broadly meeting Street expectations. Volumes were a key positive: consolidated steel sales stood at 7.6-7.64 million tonnes, marking a 14 per cent year-on-year (Y-o-Y) increase, supported by healthy domestic demand and a sharp rise in exports, which accounted for about 11 per cent of Indian sales.

 

 

However, profitability remained under pressure. Blended steel realisations declined around 2 per cent quarter-on-quarter (Q-o-Q), while raw material costs rose nearly 5 per cent Q-o-Q, driven primarily by higher coking coal prices. As a result, Ebitda per tonne fell to about ₹8,665, down sharply on a sequential basis, though marginally ahead of some estimates due to better operating leverage.

 

Motilal Oswal noted that while revenue growth of 11 per cent Y-o-Y was supported by volumes, muted net steel realisations and higher input costs led to a 16 per cent Q-o-Q decline in Ebitda. Adjusted PAT at ₹1,190 crore missed estimates, largely due to higher minority interest, even as nine-month FY26 numbers showed strong Y-o-Y growth across revenue, Ebitda, and profit.

 

Nomura: Earnings expansion intact despite cost headwinds

 

Nomura maintained a ‘Buy’ rating on JSW Steel, highlighting expectations of further earnings expansion despite near-term cost pressures. The brokerage expects Q4FY26 Ebitda per tonne to expand sequentially, supported by a sharp recovery in hot-rolled coil (HRC) prices. Nomura estimates domestic blended realisations to rise about 7 per cent Q-o-Q, or roughly ₹4,300 per tonne, in the March quarter.

 

That said, Nomura acknowledged that coking coal prices have risen more sharply than anticipated, prompting it to cut FY26 consolidated Ebitda estimates by 8 per cent to ₹31,800 crore, even after raising volume assumptions by 4 per cent above management guidance. FY27 and FY28 Ebitda estimates remain unchanged and sit above consensus.

 

Nomura raised its target price to ₹1,340, rolling forward valuation to March 2028 and applying an 8x one-year forward EV/Ebitda, citing confidence in medium-term earnings and capacity growth. The brokerage also expects consolidated volumes to increase to 7.8MT in 4QFY26, supporting margin recovery.

 

Elara Capital: Valuations rich, risks building

 

Contrastingly, Elara Capital reiterated a 'Sell' rating, flagging structural and cyclical risks. While Elara acknowledged that Q3 Ebitda rose 16 per cent Y-o-Y on higher volumes and lower operating costs, it highlighted the 9 per cent Q-o-Q decline due to weak pricing. Net debt remained elevated at around ₹80,400 crore as of December 2025.

 

Elara cautioned that despite the recent uptick in steel prices, JSW Steel faces headwinds from surplus supply, higher coking coal costs (expected to rise $15-20 per tonne), and emerging export challenges linked to Europe’s Carbon Border Adjustment Mechanism (CBAM). While it raised its target price to ₹1,089 by rolling forward valuation to March 2028, it maintained a cautious stance, citing rich valuations at current levels.

 

Motilal Oswal: Capacity growth supports medium-term view

 

Motilal Oswal struck a more constructive tone, reiterating a 'Buy' rating with a target price of ₹1,350. The brokerage stressed JSW Steel’s strong positioning, supported by new capacities coming on stream, rising share of value-added products, and efforts to increase captive iron ore usage and improve coal linkages.

 

Motilal expects double-digit revenue growth over FY26-FY28, aided by capacity ramp-up and a recovery in domestic steel prices, potentially supported by safeguard duties. Ebitda per tonne is projected to rebound to around ₹13,500 in FY27-FY28, while strong cash flows should help fund the company’s ₹15,000-20,000 crore annual capex plan and gradually reduce leverage.

 

Capacity expansion remains a key pillar

 

Management reiterated its ambition to reach 50MT steel capacity by FY31 (excluding BPSL), supported by a planned ₹1 trillion capex over the next 4-5 years, including a 5MT expansion in Odisha. 

 

While brokerages differ on valuation comfort, most agree that execution on capacity and cost control will be critical to sustaining earnings momentum amid a volatile global steel environment.   

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