Global brokerage JPMorgan has reiterated a cautious, highly selective approach toward the Indian steel sector, emphasizing that persistent cost pressures are continuing to neutralize recent market price hikes. According to JPMorgan's latest analysis, the producer spreads remain largely flat, a clear indicator that escalating raw material expenses are rising in lockstep with higher realisations, effectively keeping profit margins constrained. The brokerage expects overall steel prices in the domestic market to remain broadly range-bound in the near term, with investors hoping for rapid margin expansion needing to be patient as a gradual recovery in spreads will only begin materializing after the upcoming festive season. JPMorgan maintains a Neutral rating with target price of ₹158 for the sector.
Against the current macroeconomic backdrop, JPMorgan has explicitly voiced its surprise regarding the recent sharp equity rally seen in the PSU steel major Steel Authority of India Ltd. (SAIL). Market analysts cautioned that the current cost escalation is poised to heavily weigh on SAIL's profitability in the coming quarters. The state-run steelmaker's primary structural vulnerability lies in its significantly higher coke rate compared to industry peers. Because SAIL consumes a larger quantity of coking coal per tonne of steel produced, it is disproportionately exposed to rising input costs, threatening to aggressively widen the profitability gap between SAIL and its more agile competitors in an environment where raw material inflation is the defining headwind.
Given the sector-wide pressures, JPMorgan has reaffirmed JSW Steel as its preferred pick in the space, with the rationale firmly rooted in fundamental cost efficiency. In a market cycle where top-line realisations are constrained by flat spreads and producers are receiving similar market prices for their output, a company's internal cost structure becomes the ultimate differentiator. JSW Steel's proven operational efficiencies and superior margin protection strategies make it the most resilient option for investors. By maintaining a tighter grip on its production costs, JSW Steel is uniquely positioned to weather the current margin squeeze and capitalize most effectively once spreads eventually begin to widen post-festive season. JPMorgan maintains a Buy rating with target price of ₹2235 for JSW Steel.
The performance gap between the two companies is evident in their recent quarterly results. JSW Steel reported a 113% year-on-year jump in net profit to ₹4,651 crore in Q1FY27, driven by stronger steel prices, higher sales volumes and improved product mix. In the year-ago period, net profit stood at ₹2,184 crore. In contrast, SAIL's profit for the first quarter of fiscal 2027 declined 10.4% sequentially. The PSU posted a consolidated bottom-line of ₹1,644 crore, against ₹1,835 crore in the preceding quarter. Revenue from operations slumped 14.8% to ₹26,246 crore from ₹30,813 crore.
