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On Wednesday, Jefferies analyst Sagar Sahu upgraded JSW Steel Ltd (NSE:JSTL:IN) from Hold to Buy, raising the price target to INR1,200 from the previous INR920. The upgrade comes in the wake of recent government measures to protect the domestic steel industry and the resulting uptick in steel prices.
Sahu noted that domestic flat steel prices in India declined by 15% from June to December 2024 due to falling Chinese steel prices and a surge in imports. In response, the Indian government imposed a 12% safeguard duty on flat steel imports in April 2025 for a period of 200 days. This duty may be reviewed based on the final findings of a government agency expected around August to September 2025.
Since the imposition of the safeguard duty, domestic steel prices have increased by 14% year-to-date, reaching Rs53.5K. These prices are now 5% higher than the cost of imported steel, including the safeguard duty. The analyst has consequently increased the FY25-27E earnings per share (EPS) estimates for both Tata Steel (NSE:TISC) and JSW Steel by 22-29% and 23-24%, respectively, due to the anticipated higher steel prices.
Sahu also highlighted that while steel stocks are currently trading above their 10-year average price-to-book (PB) ratios, these valuations are expected to be sustained. This outlook is based on the healthy volume growth and potential for margin expansion within the industry. While JSW Steel has been upgraded to Buy, the analyst expressed a preference for Tata Steel, also rated as Buy, mainly due to its valuation.
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