The steel consumption in India, which has remained robust over the last three fiscal years, is set to move at an even faster pace in the coming years, buoyed by the government’s continued focus on infrastructure expansion and rising construction activity, said domestic brokerage firm Axis Securities in its latest report, while lifting the valuations on major listed steel companies, including JSW Steel and Jindal Steel.
According to the brokerage, India remains uniquely positioned as the last major steel-intensive growth economy, with a strong 0.98 correlation between steel consumption and gross fixed capital formation (GFCF), a key proxy for investment activity.
Unlike global peers, where steel intensity has already peaked and shifted toward services, India is still in the upward phase of industrialisation. This structural trend, the brokerage said, underpins the country’s long-term steel-led growth trajectory.
The brokerage also highlights that the Indian steel sector continues to trade at a premium to global peers, with 1-year forward EV/EBITDA at 8.3x versus 6.1x for global peers, a 40% premium, which reflects the long runway for volume growth in India compared to developed markets.
It also noted that India’s per capita steel consumption stands at just 103 kg, well below the global average of 215 kg, leaving significant scope for growth in the years ahead.
Domestic finished-steel consumption picked up strongly to a 12.6% CAGR over FY22-25 to reach 151 million tonnes, and it expects demand to remain robust at a 7.2% CAGR over FY25-31E to reach 230 million tonnes, noting that once-sluggish aerospace, shipbuilding and oil-and-gas segments are also beginning to add demand with new projects.
Meanwhile, to protect the Indian steel industry from low-priced imports, DGTR last month proposed a Final Safeguard Duty (SGD) on flat-rolled steel products (primarily HRC) of 11-12% for three years to protect domestic steel mills from price undercutting, which the brokerage expects will provide downward protection to margins (from low-priced Chinese imports) and help the Indian steel industry invest for growth.
Axis lifts target price on JSW Steel by 49%; Jindal Steel by 18%
Given the strong volume growth outlook and improved margin visibility, Axis has raised its target EV/EBITDA valuations for all steel companies under its coverage to a 10% premium over the past 10-year average.
It also rolled forward its valuations by a year to FY28E EV/EBITDA. The brokerage’s target prices are now based on FY28E EV/EBITDA multiples of 9.0x for JSW Steel, 7.5x for Jindal Steel, 7.0x for Tata Steel, and 6.5x for SAIL, resulting in respective increases of 49%, 18%, 16%, and 10% to ₹1,245, ₹1,170, ₹160, and ₹110.
However, based on the current trading prices of JSW Steel and Jindal Steel, the revised target prices suggest an upside potential of 9.3% and 11.64%, respectively. In contrast, SAIL and Tata Steel indicate a downside of 17.3% and 5% from their latest trading levels.
On rating, the brokerage upgraded JSW Steel and Jindal Steel to ‘ADD’ from earlier ‘Sell’ and ‘Reduce’, respectively, as it believes these companies, with their strong capacity addition pipelines, are best positioned to benefit from the growth in Indian steel demand.
However, it remains negative on Tata Steel, though upgraded to ‘Reduce’ from ‘Sell’, and SAIL (maintain ‘Sell’) due to the absence of any meaningful capacity growth plan until FY28.
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