homemarket Newsstocks NewsTata Steel, Hindalco Industries, JSW Steel slump on poor earnings visibility
market | Jul 4, 2022 1:28 PM IST

Tata Steel, Hindalco Industries, JSW Steel slump on poor earnings visibility

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Metal stocks: Shares of metal companies crashed after a gloomy commentary by Jefferies wrecked the risk-appetite of investors. Jefferies has cut earnings per share estimates (EPS) for FY23-24 by 2-34 percent for JSW Steel, Hindalco Industries, Tata Steel as it believes consensus downgrades will continue given poor earnings visibility.

Shares of Tata Steel, Hindalco Industries, NMDC, Steel Authority of India, Hindustan Copper and Jindal Steel and Power fell 2-3 percent on Monday after a gloomy commentary by Jefferies wrecked the risk-appetite of investors.

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Nifty Metal was the biggest loser among sectoral indices on the NSE. At 11:15 am, the sectoral gauge was down 1.7 percent at 4,618.45 points.
Jefferies has cut its earnings per share estimates (EPS) for FY23-24 by 2-34 percent for JSW Steel, Hindalco Industries, and Tata Steel.
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Jefferies said that it's still early to turn constructive as the price to book valuations remain above historical troughs, earnings visibility is poor, and consensus downgrades will continue. The price-to-book ratio compares a company's market value to its book value.
Here's what Jefferies' rating and target price on metal stocks look like:
StockRatingTarget price
Tata SteelHoldRs 830/share
Hindalco IndustriesHoldRs 310/share
JSW SteelUnderperformRs 405/share
Metal stocks also witnessed a sell-off on demand worries in top consumer China. China is also the top producer of metals. Mills in China have idled dozens of blast furnaces as stocks piled up after domestic demand weakened, hit by COVID-19 lockdowns and bad weather.
Meanwhile, Harsha Upadhyaya, CIO, Kotak Mahindra AMC, said that the balance sheets of almost all the metal companies in India have deleveraged by a significant amount.
"To that extent, even lower prices, which are there currently, are not really going to hurt them. Yes, they will make fewer profits, but it's not doomsday for them. On a bottom-up basis, you can still evaluate commodities, but our thesis is rather than looking at commodity producers at this point, it's better to look at commodity users who will get a better benefit over the next couple of quarters," Upadhyaya said.
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