Why Has Nuvama Turned Cautious on Jindal Steel?
Nuvama Institutional Equities has reiterated its Reduce rating on Jindal Steel & Power while cutting its earnings estimates for FY27 and FY28. The brokerage believes near-term profitability could remain under pressure due to weaker steel demand, falling long product prices, higher production costs and a slower-than-expected capacity ramp-up.
Although the company continues to expand its production capacity, Nuvama expects the benefits from these investments to take longer to materialise than previously anticipated.
Nuvama's Key Changes
✅ Maintains Reduce rating.
✅ Target price reduced to ₹1,018 from ₹1,154.
✅ FY27 EBITDA estimate cut by 9.5%.
✅ FY28 EBITDA estimate cut by 9.6%.
✅ FY27 volume estimates lowered due to weaker first-half demand.
The brokerage believes pricing pressure in long steel products and elevated production costs could affect earnings during the first half of FY27.
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Why Is the Brokerage Cautious?
| Factor | Impact |
|---|---|
| Weak Long Product Prices | Nearly 48% of volumes are exposed to long products, where prices have corrected sharply. |
| Higher Production Costs | Higher cost per tonne could pressure Q1 FY27 profitability. |
| Lower Demand | Weak first-half demand has resulted in lower volume expectations. |
| Blast Furnace Ramp-up | The 4.6 MTPA blast furnace is expected to ramp up more gradually. |
| Cost Savings Delayed | Benefits from captive coal and pellet integration are taking longer than expected. |
The brokerage expects meaningful operating cost reductions only after captive raw material integration becomes fully operational. Until then, margins may remain under pressure despite capacity expansion.
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Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that Jindal Steel's long-term expansion strategy remains intact, but near-term earnings could face headwinds from weaker steel demand, lower realizations and elevated production costs. Investors should monitor steel price trends, demand recovery, raw material cost savings and the progress of the new blast furnace before reassessing the company's earnings outlook.
Related Queries
- Why did Nuvama cut Jindal Steel's target price?
- What is affecting Jindal Steel's earnings outlook?
- Will lower steel prices impact Jindal Steel's profitability?
Disclaimer: This article is intended solely for educational purposes and should not be construed as investment advice. Brokerage recommendations may change based on market conditions and company performance. Investors should conduct their own research or consult a SEBI-registered investment adviser before investing.
