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JSTL reported a strong 1QFY27, with consolidated EBITDA of Rs93.8bn, beating our/street estimates by 9%/13%, respectively, driven by strong realizations that offset the lower volumes and higher coking coal costs. Management expects volumes to improve from 2Q, on the BF-3 ramp-up, while it believes easing raw material costs from 3QFY27 will partly offset the softer realizations. We believe rebar prices (~Rs48,000/t) are near the bottom, with demand and pricing recovering in 2HFY27, while HRC prices are likely to correct modestly as the premium over rebar normalizes. We expect JSTL's earnings to strengthen over FY26-29E, supported by safeguard-led pricing, 8% volume CAGR, and contributions from BMM, BF-3, and the 5mt Dolvi expansion; reiterate ADD

Better than expected quarter

JSTL reported consolidated EBITDA of Rs93.8bn in 1Q, beating our and street estimates by 9% and 13%, respectively, while increasing 8.7% qoq. The sequential improvement was primarily driven by stronger realizations, supported by strong pricing, delayed passthrough of contract prices, and richer flat steel mix. This more than offset an 11.6% qoq decline in sales volumes to 6.25mt (vs pro forma 7.07mt in 4Q) and a $17/t increase in coking coal costs in 1Q. Consolidated EBITDA/t stood at Rs15,000, increasing by Rs4,306 qoq vs market expectations of ~Rs2,500. Net debt declined to Rs462bn aided by deleveraging following completion of the BPSL transaction, with net debt-to-EBITDA improving to 1.46x in 1QFY27 from 1.81x in 4QFY26.

Visibility for 2Q remains supportive, despite seasonal weakness

The management expects stronger volumes in 2QFY27, driven by the ramp-up of BF-3; however, the higher coking coal costs are likely to pressure margins before easing in 3QFY27, with lower iron ore costs providing partial relief. Realizations are also expected to soften, as lower spot prices gradually flow through contract sales. We believe the BF3 ramp-up and easing input costs will partially offset pricing headwinds, supporting a sequential earnings recovery from 3QFY27. On the demand front, while underlying steel consumption remains healthy, long steel demand was temporarily impacted by monsoonrelated seasonality, channel destocking, and slower project execution; however, flat steel demand remained resilient, supported by the strong institutional, automotive, and renewable sectors. In our view, rebar prices at ~Rs48,000/t are largely near the bottom despite another 2-3 months of seasonal weakness, with demand and pricing expected to improve in 2HFY27. In contrast, flat steel prices have been relatively resilient; however, we expect some correction during 2QFY27 as the unusually wide premium of HRC over rebar narrows toward more normalized levels.

Earnings to remain supportive; reiterate ADD

We expect JSTL's earnings to strengthen over FY26-29E, supported by a favorable domestic pricing environment aided by safeguard duties and 8% volume CAGR – this will be driven by incremental contributions from BMM, the BF-3 ramp-up from 2Q, and the 5mt Dolvi expansion. We reiterate ADD on the stock with unchanged TP of Rs1,400.

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