Steel and aluminium companies, which have seen sharp corrections over the past few months due to global concerns over punitive tariffs, will likely post better sequential performance in the June quarter, led primarily by metal prices.
What to expect?
Domestic steel prices in the quarter were up by 3-4 per cent, helped by strong demand and weak rupee. Local demand for steel in April and May climbed 8.5 per cent on YoY basis. Exports from realisation are also expected to be higher due to weak rupee.
Cost pressure have also eased after coking coal prices corrected nearly 15 per cent post sharp increase in prices in march.
Aluminium prices were 5 per cent higher on sequential basis. Furthermore, supply bottlenecks during the quarter led to 25 per cent rise in alumina prices, benefiting alumina suppliers and aluminium producers with backward integration.
Stocks to be impacted
As per analysts estimates, Tata steel among the steel players and NALCO among aluminium are going to exhibit highest growth on sequential basis. Other stocks like Hindalco Industries, JSW Steel, SAIL and Jindal Steel and Power are also likely to exhibit growth on sequential as well as YoY basis.
Tata Steel (CMP Rs. 555, M Cap Rs. 67,000 crores, EV/EBITDA 6.2x FY20E)
NALCO (CMP Rs. 61, M Cap Rs. 11,800 crores, EV/EBITDA 3.6x FY20E)