JSW Steel, Tata Steel poised for margin recovery as domestic demand remains strong: Siddharth Khemka

India’s steel industry is emerging as a rare bright spot in an otherwise subdued global metals landscape. While major global markets remain mired in a low-growth cycle, domestic steel demand continues to expand, positioning India as the fastest-growing steel market worldwide. The sector is expected to deliver an estimated 8-10% volume CAGR during FY25-FY28, supported by structural domestic demand and ongoing capacity additions.

India now accounts for about 8% of global crude steel output, up from about 5% in CY10, with production growing at a CAGR of 6% over the past five years, significantly outpacing global peers. In 11MCY25, global crude steel production fell 3% year-on-year to 1.65 billion tonnes, led by a 5% contraction in China. In contrast, India posted a robust 10% growth of 149 million tonnes, driven by sustained consumption momentum in the infrastructure, real estate, transport and energy transition sectors. Finished steel consumption has grown at 6.4% CAGR over the past 15 years, outpacing real GDP growth, and is projected to sustain at around 7% CAGR during FY25-FY28.

On the supply side, domestic crude steel capacity has increased from 142 million tonnes per annum in FY20 to around 200 million tonnes per annum in FY25, with further brownfield and greenfield expansion underway. Strong balance sheets following sustained deleveraging in recent years enable manufacturers to fund growth without materially stretching leverage metrics.

Globally, China’s transition from a demand engine to a source of oversupply has put pressure on steel prices. China’s exports rose to 111 million tonnes in CY24, disappointing by global standards, with Chinese hot-rolled coil prices falling to USD 465 per tonne in December 2025 from USD 688 per tonne in March 2023. However, with increasing protectionist measures and reduced forced production, CY26-26 exports are expected to be higher than CY26. Assist in price stabilization. Domestically, safeguard duties and stricter import norms have curbed inbound shipments, leading to a December 2025 steel price hike of Rs. 49,000 per tonne has been recovered. With benign input costs and improved price visibility, spreads are projected to widen gradually- FY28 supported by re-earnings FY28.

Overall, the sector’s structural demand drivers, disciplined capacity expansion and improving pricing environment position Indian steelmakers for a multi-year growth runway despite lingering global uncertainties.

JSW Steel: Target Rs. 1350

JSW Steel is structurally positioned for strong earnings as safeguard duties, moderation in Chinese supply and rising value-added mix support domestic prices. Management guides 7-9% demand growth in FY27, while aggressive capacity additions and higher captive raw materials underpin long-term competitiveness. 3QFY26 showed volume-led resilience despite price pressure. Revenue grew 11% YoY to Rs 460b, EBITDA grew 19% YoY to Rs 66b but declined QoQ due to weak NSR and higher costs. Adj. Due to elevated minority interest Rs. PAT missed estimates at 11.9b. We maintain buys supported by margin recovery and capacity ramp-up. Management expects 4QFY26 margins to improve with price recovery and strong demand. We estimate double-digit revenue growth in FY26-28E and rebounding EBITDA to ~Rs 13,500 per tonne in FY27/28E, helped by deleveraging.

Tata Steel: Target Rs. 240

Tata Steel’s fundamentals are supported by healthy domestic demand and strong volume momentum, partially offset by near-term pricing pressures. Rising steel prices and disciplined spending actions underpin the improving outlook, while European restructuring initiatives and capacity ramp-ups increase medium-term earnings visibility despite ongoing global trade-related volatility. In 3QFY26, driven by strong domestic deliveries at Rs. Standalone operations were broadly in line, with revenue at 356b (+9% YoY, +3% QoQ). Rs. EBITDA of 77.3b reflected strong volumes but suppressed ASPs, while APAT was positive despite weak prices at Rs. Surprised at 41.7b. We estimate a gradual improvement in consolidated profitability in FY26-27E, led by higher steel procurement, sustained domestic volume growth and easing cost pressures in Europe. Operating leverage from capacity ramp-ups and restructuring benefits should support margin recovery and strong cash generation.

(Written by Siddharth Khemka, Head of Research – Wealth Management, Motilal Oswal Financial Services)

(disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. (These do not represent the views of The Economic Times)