Shares of Tata Steel, JSW Steel, and Hindalco Industries are in focus following a report from Jefferies, which issued ‘Buy’ ratings on Tata Steel and maintained a target price of Rs 180, while raising JSW Steel’s target to Rs 920 but keeping a ‘Hold’ rating. Jefferies highlighted the positive outlook for steel prices, supported by a safeguard duty. For Hindalco, the target price remains at Rs 800, with stable aluminum prices enhancing its valuations. EMkay Global noted potential challenges for steel earnings and highlighted the need for government support for future expansions. JM Financial sees a strong outlook for Hindalco’s aluminum operations.
Stocks of Tata Steel, JSW Steel, and Hindalco Industries are attracting attention today following a ‘Buy’ recommendation from foreign brokerage Jefferies on two of these three equities, while maintaining an optimistic outlook on the metals sector.
The brokerage has revised its target price for Tata Steel to Rs 180 from the previous Rs 165. Similarly, the target price for JSW Steel has been adjusted to Rs 920 from Rs 850; however, Jefferies has chosen to keep a ‘Hold’ rating on this stock. The brokerage suggests that although steel stocks are currently pricey, their valuations may hold steady in the near future, pointing out that the Asian steel spread is 20 percent lower than the long-term average and that it has room for growth.
Jefferies emphasized that steel prices in India have increased by 4 percent since their December low, and the introduction of a safeguard duty is likely to bolster margins and valuations.
Regarding Hindalco, the brokerage has retained a target price of Rs 800. Jefferies remarked that aluminium prices are maintaining a solid performance and that Hindalco’s valuation at 1.1 times the estimated FY26 book value, anticipating a 13 percent return on equity (ROE), appears justified.
The brokerage pointed out that the recovery in China and expectations surrounding safeguard duties in steel have enhanced investor sentiment, with metals stocks outperforming the Nifty by 15-20 percent year-to-date.
In a recent analysis of the steel sector, Emkay Global noted that consensus is taking a more cautious approach towards revising earnings for the sector, making shallower cuts during quarterly results to align with the slower recovery in prices and delays in projects.
“We see a possibility for the safeguard duty reversing India’s recent shift from being a net exporter of steel to a net importer historically. Additionally, we believe that large-scale expansions will require some level of government support, and the industry has expressed concerns about recalibrating its expansion plans without favorable government intervention. However, the timing and extent of such duties remain uncertain,” it stated.
This brokerage is concerned that current earnings expectations may not hold up. “We believe steel equities could face challenges due to negative earnings trends. Nonetheless, we anticipate only minor cuts that the market seems prepared to absorb and overlook,” Emkay mentioned.
On Hindalco, JM Financial indicated that LME aluminium prices are likely to remain stable at $2.6k/t levels in FY26, which would benefit Hindalco.
“With LME prices at over USD2.6k/t and the company’s guidance for Novelis’ Ebitda/tonne projected around $500/tonne for 4QFY25, Hindalco is our preferred choice in the aluminium sector, offering good earnings visibility for the next six months. Major customers of Novelis have also indicated strong demand for CY25, driven by increased consumption of beverage cans in Europe and South America. Additionally, competitors in the Novelis space have suggested improved demand in the packaging sector for CY25,” it noted.
JM Financial added that the outlook for Hindalco remains positive, buoyed by robust performance in India’s aluminium operations, high run rates in the copper sector, and enhanced coal security following the acquisition of Meenakshi, Meenakshi West, and Chakla coal mines.
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