Tag - steel prices

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07 Jul

Steel prices to be under pressure in the short term – Jindal Steel and Power

Update on Indian Equity Market:

On Wednesday, markets ended higher with Nifty closing 61 points higher at 15,879. TATASTEEL (+5.0%), JSWSTEEL (+2.7%), HINDALCO (+2.1%) were the top gainers on the index while TITAN (-2.0%), ONGC (-1.2%), and MARUTI (-0.9%) were the top losers for the day. Among the sectoral indices,  METAL (+2.2%),  REALTY (+2.0%), and FINANCIAL SERVICES (+0.6%) were the top gainers, MEDIA (-0.2%), and AUTO (-0.1%) were the only losers.

 

Excerpts of an interview with Mr. V R Sharma, MD, and CEO of Jindal Steel and Power on CNBCTV18 dated 5th July 2021:

 

  • Short-term pressure on Steel Prices is seen in International and European Spot Markets, with the prices hovering around USD 1,100 and 1,200 per tonne. This due to lower exports to Europe due to tariff and quota fears.
  • There is a value difference of around USD 200-250 per tonne between export and Indian domestic markets. There is a scope of reducing the delta to around USD 150 per tonne.
  • There is pressure on the demand for hot-rolled coils which forms part of the company’s exports which are 35-40% of the company’s total sales. This has resulted in the prices reducing to USD 1,020 per tonne.
  • The prices of other products are stable. 
  • There is a softening of about Rs 1,000-1,200 per tonne across all the products, which is normal because international prices play a vital role in today’s markets.
  • In terms of domestic demand, steel plates have shown a good demand and hot-rolled coils have shown moderate demand. The demand is very sluggish in the structural steel, construction steel, and rebar segments.
  • The company has produced 2.03 million metric tonnes of steel in 1QFY22 and is on track to manufacture 8.3 million metric tonnes for FY22. The exports for 1QFY22 were 0.6 million metric tonnes with full-year exports expected to be around 2.8 million metric tonnes.
  • The Company has Rs 165bn of debt as of 1QFY22 which the company is planning to reduce below Rs 100bn over FY22.

 

Asset Multiplier Comments:

  • Due to the Covid-19 pandemic, the demand for steel across domestic and international markets has been impacted. With the economic recovery,  there’s optimism for the sector.
  • The Company is taking efforts to deleverage its balance sheet in order to improve its performance across key operating metrics which will help the company grow further.

 

Consensus Estimates (Source: market screener website): 

  • The closing price of Jindal Steel and Power was ₹ 400/- as of 7-July-2021.  It traded at 5x/ 8x the EPS estimate of ₹ 75/ ₹ 51 for FY22E/23E respectively.
  • The consensus price target is ₹ 513/- which trades at 10x the EPS estimate for FY23E of ₹ 51/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Jindal Steel & Power Limited, JSW Steel , , , 0 Comments Read more...
08 Apr

Uptick in demand to continue for the next 1-2 quarters – SAIL

Update on the Indian Equity Market:

On Thursday, the Indian equities ended with gains despite the weekly options expiry led volatility. The Nifty50 ended at 14,874 (+0.4%) lower than the day’s high of 14,984. METAL (+3.9%), IT (+1.2%), and REALTY (+0.8%) led the sectoral gainers while PSU BANK (-0.9%), PRIVATE BANK (-0.6%), and BANK (-0.6%) led the losers. JSWSTEEL (+9.6%), TATASTEEL (+5.4%), and SHREECEM (+4.8%) were the top gainers among Nifty50 components. SUNPHARMA (-1.1%), INDUSINDBK (-1.1%), and SBILIFE (-1.0%) led the laggards.

Excerpts of an interview with Ms. Soma Mondal, Chairman, Steel Authority of India Ltd (SAIL) published in The Economic Times on 7th April 2021:

  • There are three reasons why steel prices are among the highest in a decade. One, there have been supply-side constraints, even in the second and third phase of Covid, which has impacted the ramping up of capacities in certain parts of the world. Second, China is expected to close down some inefficient units as they have a target for reducing carbon footprint. Last, being raw material supply constraints have led to a rise in iron ore prices. These factors are driving steel prices up and the demand has picked up.
  • The uptick in demand is likely to continue for the next 1-2 quarters. As prices go up, many closed capacities expected to open up, supply constraints will be eased. The increased supplies are expected to put downward pressure on prices.
  • As the vaccination drive in on, the Covid situation is expected to come under control. This will lead to some pick-up in production, which is currently hampered due to increasing Covid cases.
  • The Company is focusing on reducing its borrowing. In April-20, the debt was Rs 520 bn, which was reduced to ~ Rs 350bn by March-21. They would like to bring the debt level even more because they want to start the next phase of expansion.
  • A total focus on the balance sheet, increased volume thrust on increasing efficiencies, reducing cost, and techno economic improvement will help improve the balance sheet and leverage position.
  • The conversion costs are high for SAIL because of wages and salaries. At higher volumes, this would go down. They are reducing their manpower, hence they are not recruiting as much. With a balanced approach to recruitment and increasing their volumes, the cost of production and conversion costs will be reduced.
  • Their primary aim is to meet the domestic demand and having a strategic presence in the export market.
  • With major capacities not coming up anywhere other than in India, she expects the demand and prices to remain strong. With a lower leveraged position, SAIL would plan the next phase of expansion.

Asset Multiplier Comments

  • The demand from the auto, construction, and white goods sector and infrastructure focus by the Indian government has led to the creation of demand for steel.
  • The strong demand and rising prices since the easing of lockdown restrictions are expected to continue driving the profitability of Indian steel manufacturers.

Consensus Estimate: (Source: market screener and investing.com websites)

  • The closing price of SAIL was ₹ 96/- as of 08-April-2021. It traded at 7x/ 6x the consensus earnings estimate of ₹ 14.6/ 15.8 per share for FY22E/FY23E respectively.
  • The consensus target price of ₹ 82 implies a PE multiple of 5x on FY23E EPS of ₹ 15.8/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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05 Aug

Auto demand picking up as the festive season nears – Maruti Suzuki

Update on the Indian Equity Market:

On Tuesday, Nifty ended 1.9%, higher than the previous close at 11,095. The top gainers for Nifty 50 were Reliance (+7.4%), Zee (+6.4%), and HDFC Bank (+3.8%) while the losing stocks were Tech M (-2.8%), BPCL (-2.5%), and IndusInd Bank (-2.0%). The sectoral gainers for the day were Media (+3.8%), Financial Service (+2.3%) and Pvt Bank (+2.0%) while the losers were IT (-0.9%) and PSU Bank (-0.02%).

Edited excerpts of an interview with Mr RC Bhargava, Chairman, Maruti Suzuki; dated 04th August 2020 from CNBC TV18:

  • Auto sales in the month of July have seen a substantial improvement as compared to June and the demand is seen picking up ahead of the festive
  • Demand is beginning to pick up as the festival season is coming up. Maruti is gradually ramping up production but there are still problems as the factories are working at anywhere near 100% capacities. Safety regulations limit the capacity utilization. So with all of that, Maruti is trying to meet the demand and get up to last year without any forecast or guarantees of what is going to happen.
  • He highlighted that the number of enquiries was large and bookings were going along quite normally, compared to last year.
  • There is the pent-up demand from last year as there is some requirement of people to have mobility as the economy is opening up. However, he expects the situation for six months down to remain uncertain because of negative factors such as lower income levels of people caused by the shutdown in business activities.
  • Hospitality and travel businesses have closed down which were users of vehicles.
  • In terms of the cost of a vehicle in relation to per capita income, he believes that has gone up probably a little faster because of new regulations on safety and emissions.
  • The steel prices have never been on a straight line. There has been a period when steel prices have gone up sharply than they have flattened out and come down and then the cycle reverses. In the last two years, there were periods when steel prices were declining and they are benefited from that. Thus, he is not so worried about the increase in steel prices.
  • Talking on the personal mobility issue he said that the percentage of buying cars which are the smaller entry-level hatchbacks has gone up. The increase in the percentage of people wanting to buy small hatchbacks is an indicator that there is a requirement of people to have a small car for doing all kinds of things, going to school, going shopping and other forms of transport. So he thinks that there is some section of the consumers that needs to have personal transport instead of using shared transport or some other form of transport.

Consensus Estimate: (Source: market screener and investing.com websites)

  • The closing price of Maruti Suzuki India Ltd was ₹ 6,361/- as of 04-August-2020. It traded at 45x/27x the consensus EPS estimates of ₹ 141/239 for FY21E/FY22E respectively.
  • The consensus target price of ₹ 5,698/- implies a PE multiple of 24x on FY22E EPS of ₹ 239/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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