JSW Steel shares have gained momentum following the government's announcement of import curbs, but the steelmaker faces earnings pressure in the December quarter due to challenging market conditions. The stock rose 5.7% since December 30, significantly outperforming the benchmark Sensex, which fell 3.3% over the same period.

Market Performance and Policy Support

The rally came after the Centre's decision to levy a 12% safeguard duty for three years on December 30, providing confidence to steelmakers to raise prices twice within two weeks of the announcement. However, this positive development may have come too late for the October-December quarter, during which steel prices fell to absolute lows rivalled only by the abnormal conditions seen during the COVID-19 pandemic.

Expected Financial Performance

Analysts anticipate sequential profit decline for the second consecutive quarter, despite some cost relief from lower iron ore prices. The adverse spread between realization and input costs is expected to weigh on profitability.

Strategic Expansion and Joint Ventures

Despite near-term challenges, JSW Steel continues pursuing aggressive capacity expansion anchored in India's long-term steel demand. The company remains on track to reach 51 million tonnes per annum capacity and will add another 5.5 million tonnes through its newly formed joint venture with a Japanese steelmaker.

The steelmaker has stepped up efforts to access advanced technology through strategic partnerships:

• Partnership with South Korea's Posco Holdings for a 6 million tonnes per annum steel plant
• Joint venture with Japan's JFE Steel Corp for Bhushan Power & Steel assets transfer
• 50:50 venture structure for the Bhushan transaction

Balance Sheet Strengthening

The Bhushan deal has materially strengthened JSW Steel's financial position. As of the July-September 2025 quarter, the company's total debt stood at ₹79,153.00 crore. The transaction structure provides significant debt relief:

Key Challenges and Outlook

Regulatory risks have resurfaced with India's competition watchdog reportedly finding evidence of price collusion among market leaders including JSW Steel, Tata Steel, and SAIL, according to a Reuters report citing confidential documents. Management will likely face questions on these allegations during the earnings announcement.

Steel consumption grew 6.8% during April-December 2025, nearly half the 11% growth recorded a year earlier. However, production rose 10% during the period, compared with 4% growth in April-December 2024, indicating supply-demand imbalances.

Exports contributed 10% of total revenue in the September quarter, but the European Union's carbon tax implementation from January 1 may pressure export contributions. The carbon border adjustment mechanism's impact remains unclear as goods reach borders.

Investors will focus on management commentary regarding pricing power following safeguard duty implementation, infrastructure demand prospects from the upcoming Budget, and funding plans for the 51 million tonne capacity expansion.

Morgan Stanley has maintained its Overweight rating on JSW Steel while raising the target price to ₹1330.00, signaling continued confidence in the steel major's prospects.

Brokerage Recommendation

The global investment bank has kept its positive stance on JSW Steel with the Overweight rating, which typically indicates that the stock is expected to outperform the broader market or sector average. The revised target price of ₹1330.00 represents the brokerage's assessment of the stock's fair value based on their analysis.

Market Implications

Brokerage recommendations often influence investor sentiment and trading activity in stocks. Morgan Stanley's maintained Overweight rating suggests the firm continues to view JSW Steel favorably despite prevailing market conditions. The target price revision indicates updated valuation metrics or changed assumptions in their financial models.

The recommendation comes at a time when steel sector dynamics continue to evolve with changing demand patterns and raw material costs affecting industry players differently.