Brokerage firm Prabhudas Lilladher has upgraded JSW Steel to 'Buy' following a strong second quarter, with volumes growing 15% year-on-year. While demand from the auto and renewable sectors remains solid, investors are closely monitoring the impact of rising coking coal costs on profit margins. The company has also outlined major expansion plans to increase capacity by fiscal year 2031.
Prabhudas Lilladher has upgraded JSW Steel, shifting its stance to a 'Buy' rating. This change follows the company’s second-quarter results for the 2027 fiscal year, where it showed strong operational performance despite challenging global market conditions.
The company reported a 15% year-on-year increase in consolidated volumes, reaching 7.46 million tonnes. Export activity was a key highlight, with a 35% rise to 0.98 million tonnes. Domestically, the steel manufacturer saw significant demand from key industries, including automotive, appliances, and renewable energy, which grew by 36%, 28%, and 14% respectively.
Despite the volume growth, the company faced some profit margin pressure. Net sales realization fell 3.6% quarter-on-quarter, largely due to price weakness in long steel products. Additionally, raw material costs remain a concern. Coking coal expenses rose by US$10 per tonne during the quarter, and company management anticipates a further increase of US$25 per tonne in the coming period. Such rising costs can squeeze profitability if the company is unable to pass them on to customers through higher prices.
To support future growth, JSW Steel has approved a significant spending plan. The company intends to spend INR 162 billion on a 5 million tonnes per annum expansion at its Utkal facility, along with INR 70 billion for efficiency upgrades. These projects are part of a broader strategy to add 25 million tonnes of capacity by 2031.
The stock has seen a 12% correction from its recent peak, and investors may keep an eye on how effectively the company manages these rising input costs against its ambitious expansion timeline. Because the steel sector is highly sensitive to raw material price fluctuations, the ability to maintain margins while scaling up production will be a key factor to watch.