JSW Steel shines on favourable prices, higher volume projections

JSW Steel Ltd is poised to improve its near-term profitability from the lows of the December quarter (Q3FY25), aided by multiple factors such as improved realisation thanks to the proposed safeguard duty by the directorate general of trade remedies (DGTR), lower raw material costs, and higher volumes amid robust domestic demand.

Investors’ optimism is reflected in the company’s shares, which have gained 18% so far in 2025, making JSW the most valuable steel company in the world. In comparison, Tata Steel Ltd and Steel Authority of India Ltd (SAIL) have gained 12% and 1%, respectively, while Jindal Steel & Power Ltd is down 2% this year.

Safeguard duty promises relief

The steel industry has been grappling with a sharp rise in imports that have hurt domestic prices meaningfully, especially for flat products, which comprise 95% of imports. The DGTR recommendation for a 12% safeguard duty on steel imports for 200 days has a greater impact on JSW since flat products account for three-fourths of its sales. Recall that a 20% safeguard duty was imposed in FY16 to reduce the impact of a similar surge in imports.

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The company hiked prices of its flat products in January in anticipation of the duty recommendation, with others following suit. According to a Nomura Global Market Research report, domestic flat products are currently priced at a premium of ₹1,700 per tonne against Chinese imports but would become cheaper by about ₹4,000 after the 12% safeguard duty, creating room for more price hikes.

JSW also stands to gain from softer input costs with NMDC reducing iron ore prices by up to 6.5% in January, as it procures a significant amount from the latter. Also, coking coal prices have fallen by over 10% since Q3.

Will it hit Q4 target?

Besides, JSW expects a sales uptick in the seasonally strong fourth quarter, with full-year sales guidance of 26.5 million tonnes, which implies Q4 sales of 7.5 mt against an average of 6.3 mt in the first three quarters. However, consolidated production for January-February stood at 60% of Q4 guidance, so the company could miss its target. Kotak Institutional Equities projects JSW’s Ebitda per tonne will rise to ₹11,100 in Q4 and to ₹12,000 in FY26, against ₹7,900 in Q3, thanks to higher spreads and better operating leverage.

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In the medium term, JSW’s capacity expansion and backward integration projects wll aid revenue and earnings. Its Vijayanagar expansion project was completed in Q3 and is going through a stabilisation phase. Other expansion and debottlenecking projects are expected to be completed by September 2027, taking its total domestic capacity to 42 million tonnes per annum (mtpa).

Iron ore boost

Yet, bigger gains may be expected from the expansion of captive iron ore production to 45 mtpa by FY26 from 27 mtpa at present, with the captive share of iron ore rising to 50% from 39% in Q3FY25. Of this, about 8 mtpa of capacity should be commissioned in Q1FY26. The coking coal mine in Australia in which JSW has secured a 20% stake is expected to start production in April, while the two domestic mines are likely to be operational by Q4FY26. Higher captive sourcing mitigates the risk from raw material price fluctuations apart from reducing costs.

While JSW’s net debt-to-Ebitda ratio rose to 3.57x in Q3FY25 from 3.41x in Q2, it is expected to drop to 3.44x by the end of FY25, according to a Motilal Oswal Financial Services report. JSW Steel’s shares are trading at an enterprise value of 9.9x FY26 estimated Ebitda, based on Bloomberg consensus. Investors will take more cues from the prices of steel and raw materials.

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