JSW Steel Q3 Earnings Preview: Import Curbs Boost Stock, But Profitability Faces Headwinds
JSW Steel is poised to announce its December quarter earnings this Friday, with investors closely watching the results amid a mixed backdrop of regulatory support and operational challenges. The steelmaker's stock has shown resilience in recent weeks, but underlying earnings are anticipated to come under significant pressure.
Stock Performance and Market Dynamics
JSW Steel shares have risen by 5.7% since 30 December, outperforming the benchmark Sensex, which fell 3.3% over the same period. This surge is largely attributed to the government's imposition of a 12% safeguard duty on cheaper steel imports, effective for three years from 30 December. This move provided domestic steelmakers, including JSW Steel, with the confidence to implement price hikes twice within two weeks of the announcement.
However, this stock appreciation may be a quarter too late, as the company faced severe pricing pressures during the October-December period. Steel prices hit an absolute low, comparable only to the abnormal lows witnessed during the COVID-19 pandemic, due to factors like a weak monsoon and oversupply in the market.
Earnings Expectations and Analyst Projections
Analysts from brokerage firms such as Yes Securities and Elara Securities estimate that JSW Steel's net profit will decline sequentially for the second consecutive quarter. Key projections include:
- Revenue: Ambit Institutional Equities forecasts revenue at ₹43,194 crore for Q3, marking a 4% year-on-year increase but a 4% sequential decline.
- EBITDA: Expected to be ₹6,512 crore with margins of 15%, reflecting an 8% quarter-on-quarter drop due to lower steel realizations and higher coking coal costs, partially offset by softer iron ore prices.
- Net Profit: Elara Securities estimates profit at ₹1,288 crore, a sequential decline of about 21% from the September quarter, though it represents a 63% year-on-year rise.
Ravi Sodah, metals and mining analyst at Elara Securities, noted in a report that the adverse spread between realization and input cost is likely to weigh on profitability.
Regulatory Risks and Expansion Strategies
Beyond pricing challenges, regulatory risks have resurfaced. A Reuters report citing a confidential document indicated that India's competition watchdog has found JSW Steel, Tata Steel, SAIL, and 25 other firms colluded on steel selling prices, potentially exposing them to hefty fines. Management is likely to face tough questions on these allegations during the earnings call.
Despite immediate headwinds, JSW Steel continues to pursue an aggressive capacity-expansion strategy. The company is on track to reach 51 million tonnes per annum capacity and plans to add another 5.5 million tonnes through a joint venture with a Japanese steelmaker, formerly known as Bhushan Power and Steel. This deal has also strengthened JSW Steel's balance sheet by moving about ₹20,000 crore of debt off its books, reducing total debt by almost half from ₹79,153 crore as of the July-September 2025 quarter.
Key Focus Areas for Investors
As the earnings announcement approaches, investors should monitor several critical aspects:
- Demand and Pricing Outlook: Management commentary on further price increases post-safeguard duty and the impact of potential infrastructure pushes in the upcoming Budget will be crucial. Steel consumption grew 6.8% during April-December 2025, but this is nearly half the 11% growth recorded a year earlier.
- Exports and Carbon Tax Impact: Exports contributed 10% of revenue in the September quarter, but with the European Union's carbon tax effective from 1 January, analysts are watching for pressure on export contributions and clarity on the carbon border adjustment mechanism.
- Debt and Funding Strategies: Investors will seek details on whether fresh debt will be raised to fund the capacity expansion, given the recent balance sheet improvements.
In summary, while JSW Steel's stock has benefited from import curbs, its Q3 earnings are expected to reflect the ongoing pressures in the steel industry, making this a pivotal moment for the company's financial trajectory.
