In a note on metals companies, domestic brokerage and research firm ICICI Securities said lower realizations and coking coal cost linkages are likely in Q3FY23, though weak volume growth could spoil the fairy tale. Is.
“Key Points: Ferrous Ebitda likely to benefit from lower coking coal costs, while recoveries ease 2,000-3,000/t; 2) Volume growth may remain weak with benefits of export duty roll-back likely to be realized only in Q4FY23; 3) Higher thermal coal cost and lower LME prices may constrain profitability of non-ferrous players,” the note said.
Going forward, the brokerage expects profitability for ferrous players to improve due to recent price hike and higher shipments as export volumes improve while non-ferrous players are expected to benefit from lower thermal coal costs. There is a possibility.
That said, it awaits management’s comment and guidance on spreads/volume. its top stock picks Metal sector includes: JSPL (TP: 750; Buy), Jindal Stainless (TP: 270; Buy) and Shyam Metallics (TP: 425; Purchase).
Meanwhile it is also bullish on APL Apollo (Buy) Hindalco Industries (Buy). Its other holdings are: NMDC (ADD) Tata Steel (HOLD) National Aluminum Company or NALCO (HOLD) Steel Authority of India or SAIL (REDUCE) JSW Steel (SELL).
3 stocks to watch: “Despite a relatively stable quarter, we’ll focus on three stocks that could spring a surprise: 1) Jindal Stainless- EBITDA expected to spring back 18,000/t with shipment correction; 2) Hindalco- Novelis’ EBITDA expected at US$400/t – lower end of guidance; However, management commentary is likely to be critical; and 3) Tata Steel – TSE expects EBITDA to return to loss of US$100/te (Q2FY23: US$125/te profit) due to sharp fall in realizations. We believe that lower contract prices in Q4FY23 will further exacerbate the situation,” said ICICI Securities.
“The street is buzzing over possible stimulus measures in China and we have seen prices move higher globally, lifting sentiment. However, the overall impact on companies with global operations is likely to be smaller. That said, we’ll be keeping a close eye on domestic demand and management’s commentary.”
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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