Tata Steel, JSW Steel: 18-26% Upside Targets FY27

What Jefferies is flagging in Indian steel

Jefferies has highlighted what it calls a mispricing in Indian steel stocks after a recent bout of risk-off sentiment. The brokerage said Tata Steel and JSW Steel corrected about 9-10% after geopolitical tensions escalated in West Asia. At the same time, Jefferies pointed to domestic steel prices rising around 6%, creating a divergence between stock performance and pricing fundamentals. The firm reads this as a temporary sentiment-driven dislocation rather than a fundamentals-led derating. In its view, the current setup offers an entry point before equities start reflecting improving earnings visibility. The call is anchored in price-led earnings sensitivity for steel producers.

The disconnect: stocks down, domestic prices up

Jefferies’ argument rests on the idea that the market is over-weighting geopolitical risk. The brokerage contrasted the 9-10% correction in Tata Steel and JSW Steel with the roughly 6% increase in domestic steel prices. For steel companies, price realisations often matter more than near-term volume swings in shaping profitability. Jefferies explicitly noted this operating leverage. It said the sector’s earnings are far more sensitive to steel price moves than to sales volume changes. That sensitivity becomes central when domestic prices are firming despite risk headlines.

FY27 earnings lens: EBITDA growth and EPS sensitivity

Jefferies forecast a strong earnings trajectory into FY27, projecting 30-45% year-on-year EBITDA growth for both Tata Steel and JSW Steel in FY27. It also quantified the operating leverage: a 1% increase in steel prices can translate into a 5-8% upside in EPS. The brokerage’s stance is that current pricing strength can be a meaningful catalyst for future profitability. It said it has already raised its FY27-28 EPS estimates for the two companies, placing those estimates 6-24% above prevailing market consensus. The emphasis is that the earnings cycle can re-rate quickly when pricing sustains.

Domestic price upside: the HRC mean reversion thesis

A key driver in the Jefferies thesis is potential for further domestic price improvement. It expects a mean reversion in Asian spreads that could lift Indian Hot Rolled Coil (HRC) prices to about ₹64,900 per tonne. The brokerage presents this as part of a broader normalisation process rather than a one-off spike. Higher HRC pricing, if sustained, would mechanically support spreads and earnings, given the high sensitivity of EPS to steel price moves cited in its note.

Valuations and ROE: why Jefferies still stays constructive

Jefferies acknowledged valuations are above historical averages, but argued they are supported by better profitability metrics. It said JSW Steel trades at 2.7 times FY27 estimated price-to-book, while Tata Steel trades at 2.1 times. Jefferies backed these multiples with higher projected ROE of 17-19%, versus historical ROE of 9-13%. The brokerage’s framework implies that if ROE sustains at higher bands, higher P/B multiples can be justified even if they look optically expensive versus history.

Price targets: what Jefferies is implying

Jefferies set a price target of ₹230 for Tata Steel, implying a potential upside of over 26% from the recent closing price referenced in the note. For JSW Steel, Jefferies set a target of ₹1,400, implying an 18% upside. In a separate sector comment cited, Jefferies also named Jindal Stainless among top bets with a target of ₹1,020, implying 20% upside. These targets are positioned as outcomes of improving fundamentals aligning with market pricing.

How other brokerages are positioned on Tata Steel and JSW Steel

Other analysts are broadly constructive on the sector, though not uniformly on every stock. Motilal Oswal Financial Services recommended buying both Tata Steel and JSW Steel, with targets of ₹220 and ₹1,360, respectively, citing strong domestic demand and supportive government policies. InCred Equities took a more mixed view: it upgraded Tata Steel to ‘ADD’ with a target of ₹224, but maintained a ‘REDUCE’ on JSW Steel with a target of ₹939 due to valuation concerns. Nomura maintained Buy recommendations on Tata Steel and JSW Steel with targets that included ₹220 for Tata Steel and ₹1,340 for JSW Steel, while also listing other sector buys. JP Morgan reiterated an ‘Overweight’ stance on Tata Steel and JSW Steel, raising targets to ₹195 and ₹1,250, respectively.

Policy and demand backdrop referenced by the Street

The broader setup includes policy support via safeguard duties on flat steel products. The duty is described as spread over three years: 12% in the first year, 11.5% in the second year, and 11% in the third year. Nomura also pointed to China’s anti-involution measures, noting monthly crude steel production since April 2025 has trended at the low end of the five-year average compared with peak levels in March 2025. On demand, World Steel Association projections cited by analysts point to India’s steel demand rising 8.9% year-on-year to 161.1 MT in CY25 and a further 9.1% year-on-year in CY26.

Market moves: sector momentum alongside volatility

In the near term, metal stocks have also shown bursts of momentum. Nifty Metal was reported to have gained more than 6% over the past five trading sessions in one update. Another note mentioned Tata Steel shares up about 6% so far in 2026. These moves sit alongside the earlier 9-10% correction cited by Jefferies, reinforcing that the sector has been reacting quickly to both macro headlines and domestic pricing cues.

Key numbers table: targets, upsides, and valuation markers

What to track next

Jefferies’ central claim is that the recent correction was sentiment-led while domestic steel prices moved higher, and that this gap can narrow if price strength continues. Still, the wider Street shows dispersion, especially on JSW Steel where at least one brokerage has flagged valuation stretch with a ‘REDUCE’ rating. Investors tracking the theme will likely focus on whether domestic HRC pricing moves toward the ₹64,900 per tonne level projected by Jefferies and whether FY27 profitability trends match the 30-45% EBITDA growth expectation. Separate brokerage notes also keep attention on policy settings such as safeguard duties and on global supply signals referenced through China’s production trend.