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Domestic Steel Industry: Realization gains drive margin expansion in Q1FY27

ICICIdirect Research 31 Jul 2026 DISCLAIMER

Notably, all the players in the domestic ferrous space reported a sequential gain in sales realization by more than ₹5,000/ton, supported by safeguard duty-led price hikes, with domestic spot steel prices rising by ~₹3,500/tonne during the quarter and rising share of value-added products.
However, higher coking coal costs (up ~US$15-25/tonne QoQ) and negative operating leverage due to maintenance shutdowns limited the EBITDA/tonne improvement to ~₹2,500-3,000/tonne QoQ.
Going ahead, elevated coking coal costs (up another ~US$12-15/tonne QoQ) and softer domestic steel prices may weigh on margins, particularly for SAIL and Jindal Steel, given their ~50% exposure to long products, where prices have declined by more than ₹5,000/tonne during the quarter.
Encouragingly, domestic steel companies have retained their FY27 volume guidance, with volume growth expected to accelerate from Q2FY27 onwards.
We have a BUY rating on TATA Steel with SOTP-based revised target price of ₹270 (7.5x/4x EV/EBITDA to India/Europe business on FY28E). We are also positive on SAIL (Rating: BUY; target: ₹ 225) and Jindal Steel (Rating: BUY; Target: ₹1,220).


Vedanta Aluminium Metal: Robust performance supported by higher aluminium realizations
Total operating income stood at ₹21,393 crore, up by 12% QoQ, supported by higher aluminium prices (up 9% QoQ to ~$3,542/ton) in Q1FY27
Consequently, EBITDA/ton by ~$300/ton to ~$1,800/ton in the quarter.
Resultant PAT for the quarter stood at ₹6,597 crore, up 33% QoQ.
Going ahead, volume ramp-up at the BALCO plant, higher captive alumina integration and the ramp-up of bauxite and coal mines are expected to further improve operational performance.  
With this, we maintained a BUY rating on Vedanta Aluminium with a target price of ₹600 i.e., 7x on FY28E EV/EBITDA.
 

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