Metals: Q1FY25 preview - A 🧵
As Q1FY25 unfolds, the metal sector stands at a pivotal juncture. The past few days have looked bleak. Despite this, we expect Q1FY25 to remain stable for most companies under our coverage.
The sector is broadly classified into 3 -
🔸Ferrous
🔸Non-Ferrous
🔸Mining and others
Let us learn more.
🩷 & 🔄 for better reach!
As Q1FY25 unfolds, the metal sector stands at a pivotal juncture. The past few days have looked bleak. Despite this, we expect Q1FY25 to remain stable for most companies under our coverage.
The sector is broadly classified into 3 -
🔸Ferrous
🔸Non-Ferrous
🔸Mining and others
Let us learn more.
🩷 & 🔄 for better reach!
What is the Ferrous Segment?
🔸Industries that deal with metals containing iron as a major element.
🔸Common examples include steel (various grades), cast iron, and wrought iron.
🔸Ferrous metals are known for their strength, durability, and wide applications in #construction, #automotive, and #infrastructure.
What do we think?
🔸The revenue for ferrous companies might see a modest increase of INR 500-800 per tonne.
Why so?
🔸This is because flat product (steel sheets, plates, and coils) prices have remained relatively stable quarter-on-quarter, while the price hike in long products (rods, bars, and structural sections) has been more significant, particularly for rebars.
🔸Ferrous companies' shipments have faced challenges from rising imports, which have grown by an average of 2-3% year-on-year.
🔸When it comes to EBITDA per tonne, the picture is mixed: #SAIL (adjusted) and #JSWSteel are expected to maintain stability, #TataSteel (standalone) might experience a decline, whereas #JSPL is likely to see an uptick.
Outlook on the segment
🔸Looking ahead, we anticipate that profit margins have bottomed out for ferrous companies.
🔸Industries that deal with metals containing iron as a major element.
🔸Common examples include steel (various grades), cast iron, and wrought iron.
🔸Ferrous metals are known for their strength, durability, and wide applications in #construction, #automotive, and #infrastructure.
What do we think?
🔸The revenue for ferrous companies might see a modest increase of INR 500-800 per tonne.
Why so?
🔸This is because flat product (steel sheets, plates, and coils) prices have remained relatively stable quarter-on-quarter, while the price hike in long products (rods, bars, and structural sections) has been more significant, particularly for rebars.
🔸Ferrous companies' shipments have faced challenges from rising imports, which have grown by an average of 2-3% year-on-year.
🔸When it comes to EBITDA per tonne, the picture is mixed: #SAIL (adjusted) and #JSWSteel are expected to maintain stability, #TataSteel (standalone) might experience a decline, whereas #JSPL is likely to see an uptick.
Outlook on the segment
🔸Looking ahead, we anticipate that profit margins have bottomed out for ferrous companies.
What is the Non-Ferrous Segment?
🔸Industries that deal with metals that does NOT contain iron as a major element.
🔸Common examples include #aluminum, #copper, #zinc, #lead, and precious metals like #gold and #silver.
🔸These metals are known for their lightness, corrosion resistance, conductivity, and malleability, and wide applications in transportation, construction, electronics, and consumer goods.
What do we think?
🔸Non-ferrous companies are expected to show stronger performance, primarily driven by higher London Metal Exchange and alumina prices.
Outlook on the segment
🔸The rise in London Metal Exchange prices is likely to boost the performance of non-ferrous companies.
🔸Industries that deal with metals that does NOT contain iron as a major element.
🔸Common examples include #aluminum, #copper, #zinc, #lead, and precious metals like #gold and #silver.
🔸These metals are known for their lightness, corrosion resistance, conductivity, and malleability, and wide applications in transportation, construction, electronics, and consumer goods.
What do we think?
🔸Non-ferrous companies are expected to show stronger performance, primarily driven by higher London Metal Exchange and alumina prices.
Outlook on the segment
🔸The rise in London Metal Exchange prices is likely to boost the performance of non-ferrous companies.
What are Mining and other Segments?
🔸Mining is the process of extracting minerals and metals from the earth.
🔸This also includes other activities like processing raw materials into usable metals, manufacturing metal products (sheets, rods, and wires), recycling scrap metal trading and distributing metals.
What do we think?
🔸#CoalIndia stands to benefit from increased volume and e-auction revenue, while #NMDC is poised to gain from higher iron ore prices.
Outlook on the segment
🔸Volume growth is expected to counteract the potential impact of lower realizations.
🔸Mining is the process of extracting minerals and metals from the earth.
🔸This also includes other activities like processing raw materials into usable metals, manufacturing metal products (sheets, rods, and wires), recycling scrap metal trading and distributing metals.
What do we think?
🔸#CoalIndia stands to benefit from increased volume and e-auction revenue, while #NMDC is poised to gain from higher iron ore prices.
Outlook on the segment
🔸Volume growth is expected to counteract the potential impact of lower realizations.
In Q1FY25, we believe five stocks are likely to be in focus
🔸#TataSteel: Tata Steel Europe (TSE) may see a reduction in losses, narrowing from USD 40 per tonne in Q4 FY24 to USD 24 per tonne in Q1 FY25, driven by the profitability of its Netherlands operations.
🔸#JSPL: This is the only major steel player expected to show a QoQ increase in EBITDA per tonne.
🔸#JindalStainless: Despite high freight costs and subdued exports, expect EBITDA per tonne to rise to INR 16,300 per tonne.
🔸#NALCO: Likely to benefit from elevated London Metal Exchange aluminium/alumina prices and continued cost advantages from captive coal.
🔸#APLApollo: Record volumes and improved capacity utilization at its Raipur and Dubai plants may push EBITDA per tonne to nearly INR 4,500.
🔸#TataSteel: Tata Steel Europe (TSE) may see a reduction in losses, narrowing from USD 40 per tonne in Q4 FY24 to USD 24 per tonne in Q1 FY25, driven by the profitability of its Netherlands operations.
🔸#JSPL: This is the only major steel player expected to show a QoQ increase in EBITDA per tonne.
🔸#JindalStainless: Despite high freight costs and subdued exports, expect EBITDA per tonne to rise to INR 16,300 per tonne.
🔸#NALCO: Likely to benefit from elevated London Metal Exchange aluminium/alumina prices and continued cost advantages from captive coal.
🔸#APLApollo: Record volumes and improved capacity utilization at its Raipur and Dubai plants may push EBITDA per tonne to nearly INR 4,500.
Our key picks in the sector are
🔸#JindalStainless (BUY; Target price: INR 955)
🔸#JindalSteelandPower (BUY; Target price: INR 1,240)
🔸#JSWSteel (BUY; Target price: INR 1,140)
🔸#ShyamMetalics (BUY; Target price: INR 825)
🔸#JindalStainless (BUY; Target price: INR 955)
🔸#JindalSteelandPower (BUY; Target price: INR 1,240)
🔸#JSWSteel (BUY; Target price: INR 1,140)
🔸#ShyamMetalics (BUY; Target price: INR 825)
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