Stock Tips: After a spectacular rally in 2021 last year, steel and aluminum prices across the world weakened due to weak macro and demand concerns in China.
Stock Tips: After a spectacular rally in 2021 last year, now steel and aluminum prices across the world weakened due to weak macro and demand related concerns in China. Due to this, the positive trend of analysts of brokerage firm Jefferies regarding the Indian metal sector has faded. According to market analysts, this year, due to the conditions in China, the price of the metal will be affected. Although the brokerage firm says that after the easing of policies, demand in China may increase but it may remain less bullish than last year. In such a situation, Jefferies has downgraded Tata Steel’s rating from ‘buy’ to ‘hold’ and JSW’s rating from ‘buy’ to ‘underperform’ but the brokerage firm has expressed confidence in Hindalco and advised to buy it.
Talking about Jefferies’ top metal pick, Jefferies has expressed confidence in Hindalco as analysts are positive on Novlies’ downstream business and are placing confidence in aluminum over steel. Novelis is a 100 per cent downstream subsidiary of Hindalco, which has 55-60 per cent stake in Hindalco’s EBITDA. Now instead of steel, the use of aluminum is increasing in vehicles, which is getting the benefit of it. The analyst of Jefferies has fixed a target price of Rs 660 per share with a jump of 33 per cent for investing in it.
Tata Steel: HOLD
Jefferies has downgraded the rating of Tata Steel to hold less than buy. Analysts expect Tata Steel’s cash flows to remain strong despite pressure on working capital due to higher margins and costlier raw materials. However, according to Jefferies, unless the company’s earnings increase, its share price is less likely to rise like last year. The brokerage firm has fixed the target price for investing in it at a price of 9 percent higher i.e. Rs 1240.
JSW Steel: Underperform
Apart from Tata Steel, Jefferies has also downgraded the rating of JSW Steel. The brokerage firm has underperformed its rating by downgrading it from buy. A Jefferies analyst has set a target price of Rs 600 for JSW Steel, down 7 per cent.
Great rally in metal stocks last year
In the domestic stock market, there was a great rally in metal stocks last year. SAIL (SAIL) had gained 150 per cent, Tata Steel 105 per cent, JSW Steel 100 per cent and Hindalco 82 per cent in the last week of January and first week of May last year. Due to the rise in Asian steel prices, the prices of Hot-Rolled Coil (HRC) steel in India had almost doubled from June 2020 to October 2021, but after that, when the prices broke in China, the effect was seen here and the prices decreased.
Analysts at Jefferies believe that the peak of Indian steel companies has come in the second half of the current financial year and now it may see a decline in FY 2023. Jefferies has reduced Tata Steel’s EPS (earnings per share) by 18 per cent and JSW Steel by 26 per cent for the next fiscal year 2023, the first major cut in more than a year.
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