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Revenue in line; lower cost drives EBITDA beat

• Revenue stood at INR102b (+8% YoY and flat QoQ), in line with our estimate. The sales volume came in line with our est. at 626KT (+8% YoY and -3% QoQ). Exports share was 9% in 1QFY26 vs. 8% in 4QFY25.
• ASP stood at INR163,000/t (flat YoY and +3% QoQ), led by SS price recovery during the quarter.
• Adj. EBITDA stood at INR13.1b, up 8% YoY and 24% QoQ, against our est. of INR11.4b. EBITDA/t improved to INR20,915 (flat YoY and +27% QoQ), led by favorable pricing and lower costs during the quarter.
• APAT stood at INR7.1b (+10% YoY and +19% QoQ) against our est. of INR6b during the quarter.
• Consol. net debt stood at INR38.7b, with net debt/EBITDA of 0.8x as of Jun’25 vs 0.9x as on Mar’25

Highlights from the management commentary

• Management reiterated volume growth guidance of 9-10% YoY for FY26, with capacity utilization of 80-85%. Moreover, similar volume growth is expected in FY27, subject to timely capacity addition and demand conditions.
• JSL saw a 12% QoQ increase in higher-margin Cold Rolled (CR) volumes in 1QFY26 and guided for a further ~15-20% increase in 2H, supported by a ramp-up at Chromeni (now at 65% utilization and targeting 80-85%).
• The company aims to increase the CR share to 75% of its total melting capacity, indicating a long-term push toward higher-margin products.
• The company maintained its EBITDA/t guidance of INR19,000-21,000/t for FY26, despite volatile raw material prices.

Valuation and view

• JSL reported a decent performance in 1QFY26, supported by value-added products and subdued costs. Industry-level SS demand is set for strong growth to 7.3mt by FY31, driven by domestic SS consumption. We believe JSL is well-placed to capitalize on this robust demand outlook, with higher VAP supporting margins.
• JSL has expanded into rebar, wire rods, and others, unlocking significant infrastructure opportunities. Additionally, its focus on value-added CR SS has strengthened its position in both domestic and export markets.
• We maintain our FY26/27E earnings estimates. We have projected JSL revenue CAGR of ~14%, with steady EBITDA of INR20,500-22,000/t, leading to ~17% EBITDA CAGR over FY25-27E. Moreover, the healthy CFO and steady capex outflow will ensure a resilient B/S. At CMP, JSL trades at 9.9x EV/EBITDA and 2.6x P/BV on FY27E. We reiterate our BUY rating with a TP of INR830 (premised on 11x FY27E EV/EBITDA).

Highlights from the management interaction Guidance:

• Management reiterated volume growth guidance of 9-10% YoY for FY26, with capacity utilization of 80-85%. Moreover, similar volume growth is expected in FY27, subject to timely capacity addition and demand conditions.
• JSL saw a 12% QoQ increase in higher-margin Cold Rolled (CR) volumes in 1QFY26 and guided for a further ~15-20% increase in 2H, supported by a rampup at Chromeni (now at 65% utilization and targeting 80-85%).
• The company aims to increase the CR share to 75% of its total melting capacity, indicating a long-term push toward higher-margin products.
• The company has maintained its EBITDA/t guidance of INR19,000-21,000/t for FY26, despite volatile raw material prices.
• The SS series mix for 1QFY26 stood at 200 series - 36%, 300 series - 46%, and 400 series - 18%.
• Management expects LME-nickel prices to remain range-bound between USD15,000 and 16,000/t in the near term.

Capex:

• Capex guidance for FY26 is INR27b (incl. spill overs and maintenance capex). For FY27, capex is expected to be ~INR10-12b.
• The Indonesian SMS project is progressing as planned and will come online in FY27.
• The land acquisition of the Maharashtra expansion is underway, and the expansion will occur in a phase manner of 1mtpa x 4 unit, subject to approval and other macro/micro environment. Phase 1 is likely to come on stream by FY29-30.
• The HRAP line is on schedule for commissioning in 2HFY27.

Subsidiaries business operations:

• Despite flat volumes, JUSL (100% subsidiary) showed improved EBITDA contribution due to a better product mix.
• The Rathi steel capacity is running at 80-85% of utilization level, with 70% of the wire rod share. The rebar production remain muted, while management aims to increase the rebar output.
• Chromeni has turned EBITDA-positive and currently operates at 60-65% of the utilization level, while management targets to reach 80-85% of utilization in 2H.
• NPI operations are steadily ramping up and have already reached a certain operational stage.

Demand outlook:

• Domestic demand remained robust, especially in the auto, railways, elevators, and white goods sectors.
• JSL is increasing its focus on domestic markets due to global trade uncertainties and tariff realignments.
• For JSL, domestic demand is expected to remain the growth driver and exports will only be pursued if it benefits margins incrementally.
• Imports from China and other countries declined with the implementation of BIS quality norms and management is actively supporting anti-dumping measures.
• Management indicated that the company is fully compliant with CBAM and will continue to cater to the European market.

Other highlights:

• The company is evaluating a merger of the recently acquired downstream assets to improve tax efficiency.
• JSL has received ~USD20m from the sale of equipment for its earlier operations in Indonesia and is working on the divestment of the remaining land parcel only over favorable valuations.
• Indian Stainless Steel Development Association (ISSDA) has submitted a formal application to the DGTR over CR SS flat products from China, Vietnam, and Indonesia, alleging harmful impact on the domestic industry.

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