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JSW Steel Ltd

| Q2 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤17th Oct 25

Summary : JSW Steel reported strong Q2 FY26 performance with record production and sales, driven by domestic demand and capacity expansions, while navigating global challenges and focusing on future growth and sustainability.

Management Perspective positive : So, very good evening, everyone. Global growth, as we have all seen continues to be fairly resilient, even in the light of ongoing challenges... India continues to stand out as the fastest-growing major economy... We remain optimistic about a strong second half, backed by improving steel prices and higher production volumes from our assets.

Concall Report Analysis & Insights

Business Overview

  1. Q2 FY26 consolidated crude steel production was highest ever at 7.9 million tonnes, up 17% YoY.
  2. Consolidated steel sales reached 7.34 million tonnes, up 20% YoY, despite monsoon season.
  3. Indian operations achieved highest ever production (7.66 MT) and second highest sales (7.07 MT).
  4. Value-added and special products (VASP) sales were highest at 4.31 million tonnes, comprising 64% of total sales.
  5. Adjusted operating EBITDA was Rs.7,849 crores, with an EBITDA per tonne of Rs.10,701 and 17.4% margin.

Future Growth Prospects

  1. India's first green hydrogen electrolyser (25 MW) commissioned to reduce GHG emissions at DRI plant.
  2. Approved 2.5 GW renewable energy generation and 320 MWh battery storage capacity.
  3. Integrating advanced AI capabilities to enhance productivity, sustainability, and customer experience.
  4. Capacity expansion at JVML-Vijayanagar (5 MT) fully commissioned, BF-3 upgrade to 4.5 MT by Feb 2026.
  5. Dolvi Phase-III expansion from 10 to 15 MT progressing for Sept 2027 completion, increasing India capacity to 41.9 MT.

Management Insights

  1. Global growth remains resilient despite geopolitical and trade challenges.
  2. India is the fastest-growing major economy, with RBI raising FY26 forecast to 6.8%.
  3. Domestic steel demand remained strong, rising 8.9% YoY in Q2, driven by government spending.
  4. Company is focused on disciplined capacity expansion and strengthening raw material security.
  5. Optimistic about strong domestic demand in H2 FY26, supported by government and private Capex.

Signs of Skepticism

  1. Management acknowledges domestic prices are at a discount to import parity despite safeguard duties.
  2. Uncertainty remains regarding the full impact of GST rate rationalization on demand.
  3. The exact timeline and impact of CBAM policies on exports are still being monitored.
  4. Absolute debt may fluctuate, with management focusing more on net debt-to-EBITDA ratio below 3x.
  5. Iron ore sourcing strategy remains dynamic, dependent on market prices and grade requirements.

Risk Factors

  1. Ongoing global tariff scenarios and geopolitical challenges are headwinds for the steel market.
  2. Elevated steel imports into India continue to impact domestic pricing and sentiment.
  3. Uncertainties regarding CBAM policies and duty structures from the European Union.
  4. Potential for increased imports into India if other countries implement tariff measures.
  5. Coking coal costs are expected to increase by USD3-USD5 in Q3 FY26.

Good To Know

  1. JSW One, the digital marketplace, saw GMV jump 43% YoY to Rs.3,950 crores in Q2.
  2. JSW One raised Rs.575 crores in external funding to scale its B2B e-commerce journey.
  3. Supreme Court upheld NCLAT 2021 order, approving JSW Steel's resolution plan for BPSL.
  4. Acquired 30% stake in Illawarra coking coal asset (Australia) and acquiring Minas de Revuboe Project (Mozambique).
  5. Total planned Capex for H2 FY26 to next 3.5 years is Rs.69,000 crores, funded by internal accruals.

Key Drivers

  1. Strong domestic demand growth continues.
  2. Capacity expansions will boost volumes.
  3. Raw material security improves cost.
  4. GST cuts to lift consumer sentiment.

Key Analyst Discussions

Competitive Environment

  1. Domestic prices are at a discount to import parity due to lumpy capacity additions and external headwinds.
  2. Safeguard duties have been helpful but partly eroded by spillover of steel into India.
  3. Government is expected to take measures to prevent dumping and ensure fair trade.
  4. CBAM impact on European exports is limited as Europe accounts for only 2-3% of total volumes.
  5. Company can find alternate markets for exports if CBAM duties become prohibitive.

Market Trends & Consumer Behavior

  1. Demand traction is positive, with domestic volume growth of 14% in a seasonally weak quarter.
  2. GST rate rationalization is expected to boost consumer sentiment and demand across sectors.
  3. White goods and automobile sectors are expected to see increased consumption due to GST impact.
  4. Housing and infrastructure demand is expected to improve with GST reduction on cement.
  5. H2 FY26 is expected to be seasonally stronger for domestic steel demand.

Financial Highlights

  1. Coking coal costs expected to increase by USD3-USD5 in Q3 FY26.
  2. Iron ore prices are expected to decline in Q3, positively impacting costs.
  3. NSR decreased by about 5% in Q2, but expected to improve in November-December.
  4. Net debt-to-EBITDA ratio is maintained below 3x, despite potential absolute debt fluctuations.
  5. FX translation impact on non-INR debt caused Rs.2,000 crores increase in debt.

Product Composition

  1. VASP sales were highest ever at 4.31 million tonnes, constituting 64% of total sales.
  2. New 1 million tonne EAF plant in Kadapa will produce structural steel for construction.
  3. Expanding CRGO electrical steel capacity at Nashik and Vijayanagar plants.
  4. Upgrading Salem facilities for higher volume steel bearings and high-end niche grades.
  5. JVML's special product portfolio will grow as commissioning of facilities completes.

Strategic Considerations

  1. Captive iron ore mix was approximately 30% in Q2, expected to remain 30-40% in H2.
  2. New iron ore mines in Karnataka (Q1 FY27) and Goa (Q3 FY26) will increase captive supply.
  3. Total captive iron ore availability expected to be 22-23 million tonnes for FY26, covering 36% of requirement.
  4. Kadapa EAF plant will use domestic scrap and Andhra Pradesh iron ore for lower carbon emissions.
  5. Salav capacity expansion is part of 50 million tonnes journey, but timing depends on CBAM clarity.
JSW Steel Ltd (JSWSTEEL) Concall Report Analysis & Insights | Dhanarthi