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Edelweiss Securities recommends buying these metal stocks ahead of Q4 earnings

Updated : April 12, 2021 06:09 PM IST

The recent rally in metal stocks has been surprising. The latest developments in China, i.e. deep production cuts and the possibility of a reduction in steel exports are real and propping up sentiment and prices alike. Steel supply scarcity, constrained iron ore supply and China – continues to hold water and support prices. In light of the torrid rally, Edelweiss Securities have picked metal stocks with reasonable valuations, potential earnings surprises and deleveraging potential.

 Tata Steel | Buy | TP: Rs 1,175 (earlier Rs 770)  | Edelweiss Securities maintains Tata Steel as its preferred pick in the ferrous space. Improving spreads, iron ore security and robust European spreads are likely to propel earnings. The company’s focus on value over volume is likely to improve margin and earnings quality, it siad.
Tata Steel | Buy | TP: Rs 1,175 (earlier Rs 770) | Edelweiss Securities maintains Tata Steel as its preferred pick in the ferrous space. Improving spreads, iron ore security and robust European spreads are likely to propel earnings. The company’s focus on value over volume is likely to improve margin and earnings quality, it siad.
 Jindal Steel & Power  | Buy | TP: Rs 500 (earlier Rs 378) | We expect the volume ramp-up at Angul to sustain, the brokerage said. Besides, cost efficiencies from coke oven batteries and lower iron ore cost at least until Q1FY22 are likely to sustain margins. Low capex intensity and ongoing deleveraging are likely to improve the balance sheet further, it added.
Jindal Steel & Power | Buy | TP: Rs 500 (earlier Rs 378) | We expect the volume ramp-up at Angul to sustain, the brokerage said. Besides, cost efficiencies from coke oven batteries and lower iron ore cost at least until Q1FY22 are likely to sustain margins. Low capex intensity and ongoing deleveraging are likely to improve the balance sheet further, it added.
 SAIL | Buy | TP: Rs 120 (earlier Rs 85)  | The brokerage expects volume growth and the consequent operating leverage to be the key stock drivers. On the iron ore front, the stock is best placed due to full-fledged iron ore integration and possibility of external sales of iron ore, it said.
SAIL | Buy | TP: Rs 120 (earlier Rs 85) | The brokerage expects volume growth and the consequent operating leverage to be the key stock drivers. On the iron ore front, the stock is best placed due to full-fledged iron ore integration and possibility of external sales of iron ore, it said.
 Hindalco   | Buy | TP: Rs 420 (earlier Rs 370)  | We see a bright outlook for Novelis as the key stock driver with a stable beverage can market and fast-improving (profitable) automotive market, Edelweiss Securities said. The primary Al segment is also expected to benefit from higher LME Al prices. Besides, the balance between deleveraging and growth and focus on sustainability is likely to re-rate the stock, it added.
Hindalco | Buy | TP: Rs 420 (earlier Rs 370) | We see a bright outlook for Novelis as the key stock driver with a stable beverage can market and fast-improving (profitable) automotive market, Edelweiss Securities said. The primary Al segment is also expected to benefit from higher LME Al prices. Besides, the balance between deleveraging and growth and focus on sustainability is likely to re-rate the stock, it added.
 Coal India | Buy | TP Rs 186  | The brokerage firm sees improving volumes from large and profitable subsidiaries and focus on e-auction sales to result in stable operating performance. However, in the near term, cash accretion is likely to be impacted by ballooning receivables. We expect dividend yield to sustain at ~10%. On valuations, the stock offers a good deal of comfort as it is trading at steep discount to its historical trading range as well as the global peer set, it said.
Coal India | Buy | TP Rs 186 | The brokerage firm sees improving volumes from large and profitable subsidiaries and focus on e-auction sales to result in stable operating performance. However, in the near term, cash accretion is likely to be impacted by ballooning receivables. We expect dividend yield to sustain at ~10%. On valuations, the stock offers a good deal of comfort as it is trading at steep discount to its historical trading range as well as the global peer set, it said.
 Jindal Stainless | Buy | TP Rs 120 (earlier Rs 108)  | We see volume ramp-up, low capex intensity and deleveraging potential as the key positives for the stock. In our view, merger of the stainless steel entities within the group would also create further value, the brokerage said.
Jindal Stainless | Buy | TP Rs 120 (earlier Rs 108) | We see volume ramp-up, low capex intensity and deleveraging potential as the key positives for the stock. In our view, merger of the stainless steel entities within the group would also create further value, the brokerage said.
Published : April 12, 2021 06:09 PM IST
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