JSW Steel (JSTL IN) – Q2FY26 Result Update – Strong volume growth amid softer prices – HOLD

JSW Steel (JSTL) reported robust operating performance driven by higher volumes from JVML ramp up. Cons volume rose 20% YoY, supported by robust domestic demand, while average cons NSR declined 4.6% QoQ due to weak domestic prices in seasonally weak monsoon quarter as both flat and longs steel prices declined 4-10% QoQ in Q2. RM costs declined due to decrease in coking coal costs while P&F costs declined aided by higher use of RE in power usage and better product mix which led to JSTL delivering cons EBITDA/t of Rs10,693 (adjusting for forex M2M loss of Rs7.34bn) better than PLe of Rs9.524. Adj. std EBITDA/t was at Rs9,709. We expect steel prices to firm up in next two months with increase in govt spending on infra capex and GST led enthusiasm in user industries, supporting better realisations in H2FY26. With the expected extension of safeguard duty for three years by GoI and strong demand going ahead, sector fundamentals appear favourable. We believe a) planned ramp up of JVML b) capacity upgradation at #BF3 and c) JSTLs continued efforts to reduce costs and SC clearing BPSL case removes overhang from the stock and would drive earnings growth over FY25-28E. We tweak our FY27/28E EBITDA by -4%/4% respectively, factoring in lower pricing assumptions. We expect volume/ EBITDA CAGR of 10%/27% over FY25-28E. At CMP, the stock is trading at 9x/7.6x EV of FY27/28E EBITDA. Maintain ‘Hold’ with revised TP of Rs1,118 (earlier 1,151), valuing at 8x EV of Sep’27E EBITDA.