Metals · investment research
JSW Steel
JSWSTEEL
Verdict
NO ACTION
medium confidence · 3-5 years
Composite score
55/100
Weighted across all eight pillars
Business quality
49/100
Moat, returns, balance sheet, cash, management
Valuation score
71/100
At 22.1x against a sector median of 51.1x, the price embeds roughly 9% earnings growth. Anything less has to come out of the multiple.
Decision intelligence
Every conclusion states what would make it wrong
WHAT
No action. Nothing here is compelling enough to deploy capital today.
WHY
- • Balance sheet scores 10/100 (improving) — Leverage is high enough that a demand shock becomes a solvency question.
- • Industry & macro scores 78/100 (improving) — Metals (India) demand is improving.
- • Cash conversion scores 75/100 (stable) — Reported profit is backed by operating cash.
- • Valuation scores 71/100 (stable) — At 22.1x against a sector median of 51.1x, the price embeds roughly 9% earnings growth. Anything less has to come out of the multiple.
WHERE
Metals · Mid cap · position sized to at most 0% of an equity portfolio.
WHEN
Re-run this analysis after the next quarterly result.
WHAT IF WRONG
- • The thesis is wrong if ROCE falls below 14% or cash conversion stays under 70% for two straight quarters.
- • Valuation support fails below ₹717 of fair value — a drawdown to that level is a re-underwrite, not automatically a buy.
- • Watched risk: Leverage — Debt is 3.6x EBITDA.
WHAT NEXT
- • Read the latest quarterly cash-flow statement alongside the P&L.
- • Check Global commodity prices — it moves the earnings base independently of execution.
- • Compare against the sector peers listed below before sizing anything.
JSW Steel is a moat-protected metals business compounding revenue at 7.7% and profit at 18.2%, earning 18.1% on capital. Quality scores 49/100 and valuation 71/100 at 22.1x. The decision is therefore no action with medium confidence — this is analysis for learning, not investment advice.
What does this business actually do?
Business understanding before ratios
JSW Steel operates in the Indian metals sector with a mid-cap footprint and a listed market value of about ₹230k Cr.
Revenue is earned across 4 reported segments; profitability is driven by realisations, mix and operating leverage rather than one-off items.
Revenue drivers
- • Volume growth in the core segment
- • Realisation / pricing power
- • Mix shift toward higher-margin lines
- • Capacity utilisation
Cost drivers
- • Raw material and input costs
- • Employee cost inflation
- • Interest cost on borrowings
- • Distribution and marketing spend
Moat · 87/100
Brand & distribution
Shelf presence and recall let the company hold price through input cost cycles.
Segment mix
Growth 28.6% · margin 6.8% — Fastest growing part of the mix — watch whether margins hold as it scales.
Growth 12.7% · margin 11.3% — Growing broadly in line with the overall business.
Growth 7.1% · margin 10.9% — Growing broadly in line with the overall business.
Growth -4.4% · margin 22.3% — Flat to declining; drags the consolidated growth rate.
Analysis pillars
Score, trend and the drivers behind each — no bare numbers
Business & moat
67/100Trend: deteriorating · weight 14%
- MoatBrand & distribution
Shelf presence and recall let the company hold price through input cost cycles.
- Segment concentrationFlat products is 42.7% of revenue
Revenue is spread across segments, which softens single-market shocks.
- EBITDA margin16.0%
Margin moved from 21.0% to 16.0% year on year.
Profitability & returns
52/100Trend: improving · weight 16%
- ROCE18.1%
ROCE was 15% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- ROE17.5%
Return on equity after leverage — read alongside debt levels.
- Net margin8.3%
Share of every rupee of revenue that reaches reported profit.
Growth quality
60/100Trend: improving · weight 15%
- Revenue CAGR (4y)7.7%
Top-line compounding over the reported history.
- Profit CAGR (4y)18.2%
Profit is compounding faster than revenue — operating leverage is working.
- Growth sourceAsset-light / incremental
Capex is 7.0% of revenue this year.
Balance sheet
10/100Trend: improving · weight 12%
- Debt / EBITDA3.64x
Leverage is high enough that a demand shock becomes a solvency question.
- Debt / equity1.05x
Capital structure relative to shareholder funds.
- Working capital51 days
Cycle is tight, so growth is largely self-funding.
Cash conversion
75/100Trend: stable · weight 13%
- OCF / PAT105%
Reported profit is backed by operating cash.
- Free cash flow₹900 Cr
Cash left after maintaining and expanding the asset base.
Management & governance
39/100Trend: stable · weight 14%
- Guidance delivery41% of last 8 quarters
Whether management historically delivered what it promised.
- Promoter holding32.8% (-0.29 y/y)
Promoter ownership is stable or rising.
- PledgeNo pledge
No pledge disclosed in the sample data.
- Institutional flowFII +1.66 · DII +0.39
Direction of institutional ownership over the last year.
- Capital allocationSurplus cash is largely returned to shareholders…
Surplus cash is largely returned to shareholders rather than reinvested.
Industry & macro
78/100Trend: improving · weight 8%
- Demand trendimproving
Metals (India) demand is improving.
- StructureFragmented
Fragmented — share shifts are possible but price competition is real.
- Competitive intensitymedium
How hard it is to keep pricing and share.
- Macro driversGlobal commodity prices, China demand, Import duties
Variables that move the earnings base regardless of company execution.
Valuation
71/100Trend: stable · weight 8%
- P/E vs sector22.1x vs 51.1x
At 22.1x against a sector median of 51.1x, the price embeds roughly 9% earnings growth. Anything less has to come out of the multiple.
- Growth-adjusted1.21 (PE/growth)
Below ~1.5 the multiple is supported by growth; above ~2.5 it depends on the market staying optimistic.
- FCF yield0.39%
Cash return on the current market value, before any growth.
Financial history
Profit, cash and returns over five reported years
| Year | Revenue | EBITDA | PAT | OCF | FCF | ROCE |
|---|---|---|---|---|---|---|
| FY2022 | ₹38,591 Cr | ₹5,017 Cr | ₹2,207 Cr | ₹2,141 Cr | ₹-2,876 Cr | 17.7% |
| FY2023 | ₹41,909 Cr | ₹7,125 Cr | ₹4,418 Cr | ₹4,374 Cr | ₹602 Cr | 16.4% |
| FY2024 | ₹45,228 Cr | ₹12,664 Cr | ₹6,585 Cr | ₹6,651 Cr | ₹319 Cr | 16.1% |
| FY2025 | ₹48,547 Cr | ₹10,195 Cr | ₹5,607 Cr | ₹5,775 Cr | ₹920 Cr | 15% |
| FY2026 | ₹51,866 Cr | ₹8,299 Cr | ₹4,315 Cr | ₹4,531 Cr | ₹900 Cr | 18.1% |
No accounting-quality flags in the sample data.
Ownership & management
Who owns it, and have they delivered?
Promoter
32.8%
-0.29 y/y
Pledge
None
No disclosed pledge
FII
26.8%
+1.66 y/y
DII
6.6%
+0.39 y/y
Guidance delivered in 41% of the last eight quarters; average leadership tenure 12 years.
Surplus cash is largely returned to shareholders rather than reinvested.
- ⚠ Guidance met less than half the time over the last eight quarters
Industry & macro context
Metals (India)
Demand trend
improving
Cyclicality
medium
Competition
medium
Regulatory pressure
low
Fragmented — share shifts are possible but price competition is real.
Macro drivers: Global commodity prices · China demand · Import duties
Valuation
cheap versus the sector
P/E
22.1x
Sector median P/E
51.1x
P/B
10.38x
Earnings yield
4.52%
FCF yield
0.39%
PE / growth
1.21
Estimated fair-value band ₹717 – ₹916 , built on FY2026 EPS of ₹17.7. Gap to the current price: -13.3%. Ranges are a modelling output, not a target price.
At 22.1x against a sector median of 51.1x, the price embeds roughly 9% earnings growth. Anything less has to come out of the multiple.
Risk register
What can break the thesis, and how it is monitored
- Leveragemedium
Debt is 3.6x EBITDA.
Monitor: Quarterly gross debt and interest coverage.
- Governancehigh
Guidance met less than half the time over the last eight quarters
Monitor: Annual report disclosures and auditor commentary.
Ongoing thesis monitoring
The thesis is a living position, not a one-time verdict
| Metric | Currently | Thesis holds if | Thesis breaks if |
|---|---|---|---|
| ROCE | 18.1% | stays above 15% | falls for two consecutive years |
| Cash conversion | 105% | stays above 80% | drops below 70% while revenue grows |
| Revenue growth | 7.7% CAGR | tracks the 9% priced in | slows for two quarters with no margin offset |
| Promoter holding | 32.8% | stable or rising | falls sharply or fresh pledge appears |
Peers in the same sector
Compare before sizing anything
Data quality 72/100
Stated openly, as required by the product principles
- • Fundamentals in this build come from a deterministic sample dataset, not licensed exchange filings.
- • Segment, ownership and management figures are illustrative and must be verified against annual reports.
- • Educational analysis only — not a recommendation to buy or sell any security.