Nuvama raises Indian steel stock targets by 9-22%

Brokerage firm Nuvama Institutional Equities has raised target prices for major steel companies in India, increasing them by 9-22%. This change comes as Nuvama predicts a significant rise in flat steel output over the next two fiscal years, estimating an additional 14-15 million tons. India is expected to see a surplus in Hot Rolled Coil (HRC) during the fiscal year 2026. Major companies like Tata Steel, JSW Steel, and Jindal Steel & Power have begun expanding their HRC plants, which together can produce around 17 million tons per year. Alongside these companies, Arcelor Mittal and NMDC Steel are also increasing their production. To manage the growing supply, Nuvama suggests India needs to focus on exports. This will be possible if China restricts its own steel exports, which could happen if its production decreases or demand grows. Meanwhile, safeguard duties in India will help limit imports and encourage domestic production. Despite the rising supply, Nuvama believes this will prevent major price increases for steel. Therefore, for steel prices to rise significantly, global economic growth, strong domestic demand, and high exports are essential. Nuvama has raised its forecast for HRC prices by about ₹2,000 per ton for the fiscal years 2026 and 2027. They anticipate improvements in earnings for key companies, expecting EBITDA growth of 12-14% for SAIL and JSW Steel, and 7-8% for Jindal Steel & Power. Target prices have increased accordingly: by 22% for SAIL, 19% for JSW Steel, 13% for Tata Steel, and 9% for JSPL. Nuvama advises a 'BUY' rating for JSPL and SAIL, while maintaining a 'HOLD' on Tata Steel and a 'REDUCE' on JSW Steel due to high valuations.