Indian metal stocks have underperformed most global peers CYTD (YoY), and global brokerage Jefferies sees this as a buying opportunity and its top pick in the sector is Tata Steel, followed by Hindalco.
Jefferies highlights that its covered metals stocks – Tata Steel, Hindalco and JSW Steel (JSTL) – are down 5-14% CYTD (Nifty 50: -2%), underperforming most global peers , which are up 5-34% during the said period. Duration.
“While foreign business Tata Steel (Tata Steel Europe) and Hindalco (Novelis) disappointed in its December quarter results, the stock’s performance appeared to underperform global peers with similar underlying exposures. Specifically for Tata, the European Exchange (TSE) contributes only Rs.11/sh to our price target for the EV. 145. We see the recent poor performance in Indian metals as a buying opportunity; Our top pick is Tata, followed by HNDL.”
The brokerage has a buy rating metal stock Tata Steel has set a target price of Rs. 145 per share with a target price of Hindalco. 570. Meanwhile it has assigned Underperform (UNPF) rating on JSW Steel shares with a target price of 470.
“China’s economic data is showing signs of improvement, with the manufacturing PMI hitting an 11-year high and asset prices starting to stabilise. After a 23% decline in CY22, China’s export steel prices are set to rise by 14% in CYTD 2023. Asian steel spreads are still 10% below the long-term average, and we see room for further expansion,” the note said.
India became a net importer of steel in 2HCY22 as domestic prices were at a premium to imports and the government imposed an export duty of 15% in May 2022.
“With domestic prices now marginally subsidized on imports and the government scrapping export duty in November, net imports declined in January. Our estimate factors in HRC steel prices in India. 61.0-61.5K/t in FY24-25E, roughly inline with spot,” Jefferies added.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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