The brokerage noted that China domestic hot-rolled coil (HRC) prices have risen 8% in the past month, supported by hopes of production cuts under Beijing’s “anti-involution” policy and a stimulus-linked $167 billion hydropower project. While export HRC prices from China have also increased, up 6% over the same period, the domestic-export gap suggests potential for further spread convergence.
“This price recovery has driven an expansion in Asian conversion spreads by 14%, though the spreads are still 20% below historical average and have room to expand,” Jefferies said.
Despite this recovery in China, Indian domestic HRC prices have softened 2% over the past month and are now 5% below landed Chinese imports. Jefferies believes domestic prices could rise to Rs 53,000/tonne if they align with imported steel, compared with the current spot price of Rs 50,500/tonne.
Based on its price assumptions of Rs 52,000/tonne in FY26 and Rs 53,000/tonne in FY27, Jefferies said, “our FY26–27E EPS for TATA are 5–15% above consensus.”
Tata Steel: 23% upside potential
Jefferies reiterated a ‘Buy’ rating on Tata Steel with a target price of Rs 200, implying a 23% upside from the stock’s current Rs 162.85. The brokerage forecasts EPS of Rs 10.6 for FY26 and Rs 15.0 for FY27.
With steel spreads still recovering and domestic prices trailing imports, Jefferies expects further margin expansion and volume growth to support Tata Steel’s earnings trajectory over the next two years.
Jindal Stainless: Policy support and China rebound to aid recovery
Jindal Stainless (JDSL) is the other top pick for Jefferies, with the brokerage maintaining its ‘Buy’ rating and a price target of Rs 800, suggesting an 17% upside from the stock’s current price of Rs 684.30.
Jefferies expects EBITDA/tonne for JDSL to increase to $200 in FY26 and $215 in FY27, up from $195 in FY25. The brokerage said JDSL stands to benefit from “easing imports, aided by BIS norms, sequential recovery in exports and potential rebound in China SS spreads from 10-year low.”
Stainless steel imports into India fell sharply to an average of 64,000 tonnes per month in April–May 2025, compared to 112,000 tonnes in the second half of FY25. This decline is attributed to new BIS standards on utensil imports for medium enterprises, with further mandates for small and micro businesses set to take effect by October.
Export volumes have also risen marginally to 25,000 tonnes per month in the same period, up from 22,000 tonnes in the second half of FY25. However, Jefferies cautioned that “global stainless steel demand environment remains uncertain,” pointing to subdued conditions in Europe.
Still, any rebound in Chinese stainless steel spreads, currently 30% below long-term averages, could support JDSL’s profitability. Media reports suggesting that Tsingshan Holding Group, the world’s largest stainless steel producer, has suspended some production also indicate a possible supply response in China.
Sector view: Prefer steel over aluminium
Overall, Jefferies said it remains bullish on the Indian steel sector. “We remain positive on India steel as we expect JDSL, JSTL and TATA to deliver 8–10% volume CAGR and 15–36% EBITDA CAGR over FY25–27E,” Jefferies’ analysts said.
Among other stocks, Jefferies has a ‘Buy’ rating on JSW Steel with a target price of Rs 1,200 (16% upside), and on Coal India with a target of Rs 455 (19% upside). It has a ‘Hold’ rating on Hindalco, with a price target of Rs 690.
Jefferies’ FY26 EPS estimates are Rs 36.2 for JDSL, Rs 10.6 for Tata Steel, Rs 44.5 for JSW Steel, Rs 57.4 for Coal India, and Rs 66.7 for Hindalco.
Jefferies’ preferred plays in the space are Tata Steel and Jindal Stainless. “JDSL & TATA are our preferred Buys,” the brokerage said.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
