Jindal Steel: Nuvama ups target by 20% despite weak Q2 expectations; here's why

Nuvama Institutional Equities has raised its target price on Jindal Steel by 20 per cent to Rs 1,426 from Rs 1,193, even as it flagged expectations of a weak Q2 performance. The brokerage said the commissioning of the long-awaited 4.6 mtpa blast furnace (BF) and 3 mtpa basic oxygen furnace (BoF)—delayed by nearly two years—provides strong volume growth visibility. It projected a volume CAGR of 17 per cent over FY25–28 against just 1 per cent over FY22–25.

According to Nuvama, the likely final imposition of safeguard duty on flat steel imports for three years, combined with the end of monsoon, should support an improvement in domestic flat and long steel prices from November onwards.

“Despite weak Q2FY26 expectations amid lower steel prices, we maintain FY26E/27E Ebitda. We rollover estimates to FY28, valuing the stock at 7.0x FY28E EV/Ebitda, which yields a target price of Rs 1,426; we reiterate a ‘BUY’,” Nuvama said.

Capacity expansion underway

Jindal Steel achieved a key milestone with the commissioning of its 4.6 mtpa BF and 3 mtpa BoF, a project that took nearly 4.5 years from setup to trial runs and eventual production. Ramp-up is expected to begin in H2FY26, driving sales volumes up 12.5 per cent year-on-year to 9 mt in FY26 and 25 per cent year-on-year to 11.2 mt in FY27. Another 3 mtpa BoF is scheduled for commissioning in H1FY27, which would raise total capacity by 62 per cent to 15.6 mtpa from 9.6 mtpa.

Following completion of the 6 mtpa flat steel project, Jindal Steel’s share of flat products is expected to rise to about 70 per cent (versus 55 per cent in Q1FY26), improving product mix and margins.

Integration benefits

Jindal Steel is strengthening both backward and forward integration through projects such as coal blocks, a slurry pipeline, a pellet plant, and new galvanising and colour-coating lines, all expected by FY27, Nuvama said. In addition, the likely safeguard duty on hot-rolled coil imports and softer coking coal prices should drive Ebitda per tonne above Rs 15,000 in FY26E and Rs 16,700–16,800 in FY27E/28E, compared with an average of Rs 12,716 in FY23–25.

Nuvama estimates that with a 17 per cent steel volume CAGR, better product mix, captive coal and pellets, and cost efficiencies from the slurry pipeline and conveyor belt, Jindal Steel’s Ebitda will more than double over FY25–28E to Rs 21,300 crore, implying a CAGR of 31 per cent.

Balance sheet

As of Q1FY26, net debt/Ebitda rose to 1.49 times due to higher working capital tied up in inventories. However, volume ramp-up and working capital release should help reduce leverage to below 1 time by FY26E and further down to 0.1x in FY28E. The company has completed about 60 per cent (Rs 28,150 crore) of its ongoing Rs 47,000 crore capex plan by Q1FY26. The balance Rs 18,850 crore is scheduled to be completed by FY28, with a projected outlay of Rs 9,600 crore in FY26E and Rs 8,200 crore in FY27.

“We reckon the company’s RoCE will expand from about 11 per cent in FY25 to 21.4 per cent in FY28E, powered by a 31 per cent EBITDA CAGR over FY25–28E. Jindal Steel stands out among peers with the highest projected earnings growth and the least leverage over the next three years,” Nuvama said.