JSW Steel shares maintain Overweight rating with robust EBITDA and resilient HRC

On Monday, JPMorgan analyst updated the firm's outlook on JSW Steel Ltd (NSE:JSTL:IN), increasing the price target to INR1,020 from INR1,010 while reaffirming an Overweight rating on the stock. The adjustment follows JSW Steel's reported earnings, which surpassed both consensus and JPMorgan's own estimates, primarily driven by robust performance in the company's Indian operations.

JSW Steel's consolidated EBITDA grew by 3% quarter-over-quarter, despite a 5% decrease in Indian Hot Rolled Coil (HRC) prices. This growth was attributed to a favorable product mix, effective cost management, and strong volume growth within the Indian market. The company's overseas subsidiaries did not perform as well as expected, but the shortfall was offset by the Indian segment's positive results.

The analysis pointed to JSW Steel's strategic initiatives, such as optimizing coking coal blends and increasing Pulverized Coal Injection (PCI) coal sourcing from Russia, which are expected to yield cost savings. The near-term outlook for JSW Steel is considered stable, with limited downside risk to HRC prices, especially as the fourth quarter tends to be seasonally strong. Additionally, domestic HRC prices are currently slightly below import parity.

Further contributing to the positive outlook are the recent drops in iron ore prices by NMDC (NSE:NMDC) and a lower coking coal cost forecast for the fourth quarter, which should support profit margins. The potential imposition of a safeguard duty on steel imports in the coming weeks is also highlighted as a potential positive catalyst for the company.

JSW Steel's net debt to EBITDA ratio was well managed at 3.57x, which is within the company's stated cap of 3.75x, even in a challenging macroeconomic environment. The fourth quarter is expected to benefit from higher volumes and the release of working capital. With these factors in mind, JPMorgan's revised price target reflects a forward-looking valuation to March 2026, and the firm continues to recommend purchasing the stock on dips.

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