Market

Metals & Mining: Q1FY22 preview – Another blockbuster quarter in the offing

Emissions rise from a chimney at a Tata Steel Ltd. plant in Jamshedpur, Jharkhand, India, on Monday, Feb. 11, 2019. Tata Steel is shifting its focus to India, where a government-led thrust on infrastructure is supporting demand. Plans are underway to double capacity in five years through expansions at existing mills and acquiring indebted domestic mills. Photographer: Anindito Mukherjee/Bloomberg

Despite Covid-19 related disruptions, Q1FY22 is likely to be a record quarter for most companies in our coverage. Key points: (i) A q-o-q volume dip likely for most companies; (ii) ferrous companies (flats oriented) are likely to fare better; (iii) debt reduction likely; (iv) higher iron ore and crude derivatives’ cost to weigh on performance.

For almost all firms we expect margins to sustain at or breach the record-Q4FY21 levels. We maintain Tata Steel (TP: Rs 1,300), Hindalco (TP: Rs 475) and Jindal Stainless (TP: Rs 140) as our preferred picks.

Another glorious quarter…: Key points: (i) Flats-oriented ferrous companies such as Tata Steel and JSW Steel to deliver record margins on the back of realisation uptick in both exports and domestic volumes; (ii) overseas subsidiaries of Tata Steel and JSW Steel to deliver massive outperformance due to higher realisation; (iii) The Al division’s Ebitda in non-ferrous companies would show a good improvement mainly due to higher LME price; (iv) volumes of non-ferrous companies to be subdued as well owing to Covid-19 related disruptions. We see scope for substantial deleveraging at steel companies, particularly Tata Steel and SAIL.

Metals & Mining: Q1FY22 preview – Another blockbuster quarter in the offing

…but lower volumes and higher cost to weigh: Q2FY21 would have been much better, but for higher costs and lower volumes. Production/sales volume for ferrous companies are likely to be impacted by diversion of industrial oxygen for medical purposes and sporadic lockdowns owing to Covid-19. As a result, we expect sales volumes of ferrous companies to decline 10% q-o-q on average. For non-ferrous companies as well, volume is expected to be down ~14% q-o-q on average.

Outlook: We expect Q1FY22 to mark a successive quarter of blockbuster performance. Benefits of higher realisation are likely to offset the adverse impact of higher cost at most companies.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Metals & Mining: Q1FY22 preview – Another blockbuster quarter in the offingFinancial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.



Most Related Links :
reporterwings Governmental News Finance News

Source link

Back to top button