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Steel Q1FY27 Margins Boosted: Healthy Industry Gains & Realizations Drive Profits

ICICIdirect Research 22 May 2026 DISCLAIMER

Domestic steel players reported healthy performance in Q4FY26. They reported a sequential increase in sales realisation of ~₹3,200-4,800/ton in Q4FY26, primarily driven by higher domestic steel prices following the imposition of a 12% safeguard duty on steel imports.  
This has largely offset the rise in coking coal costs (~US$15-20/ton QoQ), resulting in EBITDA/ton improvement in the range of ~₹2,200-3,800 on a QoQ basis..
Among the domestic players, SAIL reported the highest EBITDA/ton expansion of ~₹3,800 QoQ, supported by cost optimisation initiatives and inventory liquidation benefits..
Going ahead, firm domestic steel prices are expected to support further realisation gains, with domestic spot steel prices up by ~₹10,000/ton from the Dec’25 low of ₹46,500/ton. However, higher coking coal costs (~US$15-25/ton QoQ) may partially offset these benefits.
Notably, Tata Steel has guided for the highest realisation improvement of ~₹6,000/ton, which is likely to translate into EBITDA/ton expansion of ~₹3,500 in Q1FY27, which will be the highest gains among domestic steel players.
Additionally, domestic steel companies expect steady volume growth in FY27 with Jindal Steel anticipates a healthy volume growth of ~20% in FY27, driven by the 6 MTPA capacity commissioned at its Angul plant in March’26, taking its total steelmaking capacity to ~15.9 MTPA.
Notably, JSW Steel has revised its India steelmaking capacity target to 62 MTPA by FY32 from 50 MTPA by FY31, Additionally, the company plans further capacity additions through joint ventures with ~10 MTPA expansion at JFE Steel and ~5 MTPA greenfield expansion at POSCO. With these expansions, JSW Steel’s total steelmaking capacity is expected to reach ~78 MTPA by FY32, thereby marking the highest capacity addition among domestic steel players.
Thus, we remain positive in domestic steel space and our top preference will be Tata Steel backed by strategic capacity expansions, healthy domestic demand, safeguard-duty-led price hikes, and continued cost optimisation initiatives.
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: ₹ 240) and Jindal Steel (Rating: BUY; Target: ₹1,410) while have a HOLD rating on JSW Steel with a target price of ₹ 1,400 (primarily on the back of rich valuations)
 
Novelis: better than expected EBITDA/ton in Q4FY26 driven by favorable scrap spreads
Novelis, a key subsidiary of Hindalco contributing ~60% and ~56% to its revenue and EBITDA, respectively, delivered a stable performance in Q4FY26
Total operating income for the quarter rose by 4% YoY and 14% QoQ to ~$4.8 billion. While sales volume increased modestly by 4% QoQ to 844 kt, impacted by a 73 kt decline due to the fire impact on Oswego facility.
Adjusted EBITDA per tonne rose 26% QoQ to $544/tonne, supported by favourable scrap spreads.
On the downside, the cash flow impact from the Oswego fire has increased to ~$1.7 billion, driven by higher repair expenses. Nonetheless, the Novelis expects ~75%-80% of the losses to be recovered through insurance over a two-year period.
Furthermore, the commissioning of the 600 KT Bay Minette plant by H2CY26 is likely to boost growth and margin expansion, while the long-term EBITDA per tonne guidance remains unchanged at $600/tonne. Our last rating on Hindalco was HOLD with a target price of ₹950.

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