Buy JSW Steel; target of Rs 1470: Motilal Oswal

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Volume growth: JSW Steel's volume is expected to increase in 3QFY27, driven by full production from Vijayanagar BF3, with the company on track to achieve its FY27 production and sales guidance.
  • Domestic steel demand: Robust domestic steel demand, supported by public and private capex, manufacturing activity, automotive demand, and improving construction activity, is expected to drive growth.
  • Raw material security: The company is increasing its captive raw material integration, with a focus on iron ore and coking coal, to support rising capacity and improve cost competitiveness.
  • Deleveraging: The company's consolidated debt has declined significantly, with a net debt-to-EBITDA ratio of 1.28x in 2QFY27, strengthening its balance sheet.

Thesis Validation Checklist

  • Steel volumes: Watch for steel volume growth in 3QFY27, driven by Vijayanagar BF3 production and improved operations at JVML.
  • Domestic steel prices: Monitor domestic steel prices, which are expected to recover, supporting the industry's ability to maintain margins and fund planned capex.
  • Raw material costs: Track raw material costs, including coking coal and iron ore, which may remain marginally higher in 3QFY27, but are expected to soften over coming quarters as supply bottlenecks ease.
  • Debt reduction: Follow the company's debt reduction progress, with a focus on internal cash generation and temporary support via debt if required.