If Indian steel players can consolidate and increase volumes (absolute), domestic brokerage and research firm ICICI Securities believes that there will be value creation here, despite the volatility. It sees that Indian steel players have been able to do so in an inflationary environment over the next few years.
Brokerage maintains buy ratings metal stock Hindalco with target price 700, APL Apollo (Target Value.) 1,100), Jindal Stainless (TP: 252), Jindal Steel & Power (JSPL) (TP: 618), and with a target price of Tata Steel 1,700
Whereas, it has hold recommendations on JSW Steel (TP:). 652), NMDC (TP: 150), National Aluminum Company (Nalco) (TP: 119), with a target price of Steel Authority of India (SAIL) 99. The brokerage house has increased the target price of the shares of Tata Steel, Hindalco, JSPL and JSW Steel.
“With strong undercurrents of inflation, we expect supply side imbalances across various commodities (steel, aluminium, zinc, nickel, etc.) to continue. The (dual) effect of cost curve rise and export restrictions from Russia is being felt in i) aluminium, ii) zinc and iii) steel. The impact of potential sanctions in coal and nickel is expected, and the potential impact of export volumes from Ukraine is felt in ferro alloys (FeMn, FeSiMn), iron ore and steel,” the brokerage said.
Besides, secondary players may face shortfall in domestic supply of thermal coal. ICICI Securities pointed out that lead lag in steel prices versus RM prices may allow interim extension of EBITDA/t (as seen in previous cycles).
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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