Tata Steel, SAIL, JSW Steel, JSPL: Top metal stocks to buy or hold
Domestic steel demand is expected to maintain a growth of 6%-7% with higher outlay on infrastructure and impetus by the government, as per brokerage and research firm Antique Stock Broking which believes that Indian steel exports might see uptick, to fill the demand gap created by disruptions effected by earthquake in Turkey (8th largest producer of steel in the world). Steel spreads are expected to improve in 4QFY23 aided by higher realizations and better volumes.
The sentiment would improve with firm pricing outlook and recovery in steel spreads, as per Antique Stock Broking. The brokerage house has maintained its BUY rating on metal stocks Tata Steel with a target price of ₹131 per share, Jindal Steel and Power or JSPL (TP: ₹676) with attractive valuations and has HOLD tag on Steel Authority of India or SAIL (TP: ₹91), JSW Steel shares (TP: ₹650).
“Chinese export HRC prices have risen 9% to USD 640 per ton from 3QFY23 exit level of USD 585 per ton, while Chinese domestic steel prices have also increased 6% to USD 635 per ton from 3QFY23 exit level of USD 601 per ton amidst indications of opening up of the Chinese economy. Chinese EBITDA spreads continue to remain negative, providing support to current prices,” the note highlighted.
Domestic steel HRC spot prices at INR 59,300 per ton levels are 6% higher from 3QFY23 average levels and currently at ~3% discount to Chinese import parity prices and 4% below import parity prices from FTA countries like Korea and Japan.
“International spot coking coal prices have risen ~31% from 3QFY23 average level to USD 385 per ton, the effect of which would come in with a lag by 1QFY24, once low-cost inventory with steelmakers is exhausted. Companies like Tata Steel (100% captive iron ore and 15%-20% coking coal integration) and JSPL (~20% coking coal through overseas mines) would be partially insulated from raw material inflation. 4QFY23 outlook for Indian steelmakers seems strong with higher realizations and better volume deliveries,” it added.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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Ganesh
http://ganesh@finplay.inFinance enthusiast, Mutual fund expert.