JSW Steel, India’s largest private steel producer, delivered a strong operational performance in Q2-FY26, driven by high volumes despite lower steel prices. Prabhudas Lilladher noted in a recent report that the company “reported robust operating performance,” with consolidated sales volume up 20 per cent YoY (year-on-Year) to 7.34 million tonnes. Despite a 4.6 per cent QoQ (Quarter-on-Quarter) decline in average realisations due to monsoon-led weakness, cost management and operating leverage led to profitability. It expected “steel prices to firm up in the next two months with an increase in government spending on infra capex and GST-led enthusiasm.”
The Q2-FY26 consolidated revenue rose 14 per cent YoY, supported by production of 7.78 million tonnes (+25 per cent YoY). The growth was driven by export recovery, as exports went up 69 per cent YoY. Average realizations slipped 5 per cent YoY. EBITDA was up 44 per cent YoY, with a higher margin of 17.4 per cent. According to the above report, “cost savings and volume gains lifted profitability,” and “raw material cost per tonne declined 8 per cent YoY… on soft coking coal costs, while power and fuel cost per tonne fell 12 per cent YoY.”
Net profit was up a massive 270 per cent YoY, despite a Rs 7.3 billion forex mark-to-market loss. The report projected a strong earnings growth: “We expect volume/EBITDA CAGR (compounded annual growth rate) of 10 per cent/27 per cent over FY25-28E.” On a full-year basis, PL’s estimates show revenue rising in FY26 and FY28, with EBITDA climbing, implying margins improving to nearly 20 per cent. The balance sheet remains stable, with net debt at Rs 791.5 billion. Net debt-to-equity is projected to decline from 0.9x in FY26 to 0.6x by FY28, reflecting disciplined leverage despite heavy capex.
JSW Steel’s near-term risks stem from cyclical price pressures, high capex commitments, and global trade dynamics. In addition, it faces execution and integration challenges amid aggressive expansion. The firm announced a Rs 690 billion capex plan over the next 3.5 years. JSW’s global businesses face headwinds. The report pointed out that the “US subsidiary (Ohio) EBITDA loss narrowed YoY to marginal loss at $4/tonne as prices softened,” and “Italy operations improved QoQ but EBITDA declined 9 per cent YoY.” These units remain sensitive to pricing volatility, tariffs, and logistics disruptions.
Elara Securities highlighted the interconnected risk framework that extends to steel operations, emphasising the “need for careful balance sheet management amid elevated leverage and capex intensity.” Environmental compliance costs, and renewable transition obligations may impact short-term cash flows. JSW’s move toward decarbonisation, such as commissioning India’s first 25-MW green hydrogen electrolyser, positions it to mitigate long-term risks.
JSW Steel’s strength lies in its scale, efficiency, and integration across the value chain. Its domestic capacity utilisation stood at 92 per cent. According to Prabhudas Lilladher’s report, “JSW’s continued efforts to reduce costs, and the Supreme Court clearing the BPSL (insolvency) case remove overhang from the stock, and would drive earnings growth over FY25-28E.” The company is expanding its product mix and downstream capabilities. The company’s board has approved the building up of an electric arc furnace plant, a section mill, and facilities for bearings and premium niche-grade steel.
(For several years, JSW Steel had tried to take over Bhushan Power and Steel under the insolvency laws. There were several twists and turns. The final slide came when the Supreme Court rejected the company’s Rs 20,000 crore resolution plan. Bhushan Power was ordered to be liquidated. However, in a rare reversal of its judgment, the apex court later upheld JSW’s plan. With the addition of Bhushan Power, despite the delays, the company’s future is bright. It will add a lot of momentum to the ongoing projects, and decisions.)
Operationally, vertical integration provides cost advantages. JSW sources 36 per cent of its iron ore needs from captive mines. It benefits from robust governance, and steady promoter backing. Its 45.3 per cent promoter holding, combined with strong institutional support (36 per cent FII and DII ownership), underlines investor confidence. The outlook for the company remains constructive as domestic demand strengthens and capacity expansion gains traction.
Prabhudas Lilladher expects EBITDA margins to improve to 19.8 per cent by FY28, supported by cost optimisation, product diversification, and rising share of value-added steel. “We believe the planned ramp-up of JVML, capacity upgradation at BF3, and JSTL’s continued cost-efficiency efforts would drive earnings growth over FY25-28E.” Capex visibility remains clear. Valuations remain moderate amid near-term softness. The report reiterated a “Hold” rating with a target price of Rs 1,118. “At the current market price, the stock trades at 9x/7.6x EV of FY27/28E EBITDA.” The brokerage’s long-term view remains positive, supported by volume-led growth and strong balance sheet.
Meanwhile, the group’s renewable and hydrogen ventures through JSW Energy will provide downstream synergies. Elara Securities, another brokerage house, stated in a recent report, “JSW is investing in hybrid/FDRE plants, BESS/PSP, and green hydrogen, led by a strong balance sheet and cash flows,” which aligns with JSW Steel’s sustainability-driven roadmap. Clearly, the company’s recent performance underscores a powerful recovery in volume growth, and operational efficiency despite challenging pricing conditions. Its diversified project pipeline, prudent financial management, and commitment to green transformation place it in a strong position.
