“Upward revisions of consensus estimates and near-term strength in steel prices are likely to drive further rally inthe stocks,” said CLSA.
Every Rs 1,000 per tonne higher steel prices versus the base case leads to $235 million higher deleveraging for
and , the brokerage said.
CLSA continues to prefer Tata Steel in the steel sector.
“Deleveraging remains a key focus, while we expect an announcement on the Kalingangar Phase 2 expansion in the next fiscal year. Given the price increase in Europe, profitability there could surprise,” said CLSA, raising target price to Rs 950 from Rs 860, while retaining a buy rating. CLSA has upgraded Tata Steel to outperform from sell and raised target price to Rs 490 from Rs 340.
“With domestic iron ore supply improving and volume growth from commissioning of new capacities, we expect strong earnings growth over the next two years,” said CLSA.
The brokerage said it is bullish on JSW Steel on improved risk to reward. CLSA said it awaits further clarity but at current spreads, the Bhushan Power acquisition could be value neutral.