Steel company shares continued their move north with industry giants Tata Steel and JSW Steel hitting their respective 52-week highs on Thursday after they reported strong gains during the recently concluded quarter.
JSW Steel gained 5 percent to trade at Rs 354 and Tata Steel rallied 4 percent to Rs 565 in intraday trading today, while Steel Authority of India (SAIL) and Jindal Steel and Power (JSPL) rose 7 percent and 6 percent, respectively. At 2:37 p.m., the S&P BSE Metal Index, the top winner among industry indices, was up 3 percent compared to a 0.51 percent gain on the S&P BSE Sensex.
Tata Steel has rallied 38% in the last month, compared to a 10% rise in the benchmark. The company posted strong results in India with broad-based market leading volume growth and strong cash flow generation in the September quarter (Q2FY21). The company’s Ebitda (earnings before interest, taxes, depreciation and amortization) from the India operations increased 4.1-fold sequentially and 49 percent year-on-year (yoy) to Rs 6,025 crore driven by higher volumes, improved realizations and cost efficiencies.
After 13 years of trying to operate in one of the toughest environments (strict carbon standards, weak import controls), Tata Steel is once again trying to get out of Europe. His plan to sell the Dutch business (Ijmuiden) to SSAB is a win-win situation, analysts say. Emkay Global Financial Services has upgraded Tata Steel to buy with a target price of Rs 638 per share driven by strong steel and a weak RM cost environment. The possibility of divestment from Ijmuiden’s operations will wipe the balance sheet faster and re-rate the shares, he said.
Meanwhile, domestic steel production and consumption continued to improve in October 2020, both sequentially and year-on-year. Both steel production and consumption have steadily improved since April 2020.
“Crude steel capacity utilization levels improved as the economy unblocked and demand recovered initially thanks to higher international demand before domestic demand started to pick up, which eventually moderated exports. bottoming out in April 2020 at 27%, Crude steel capacity utilization rate returned to the previous year’s level of 76% in October 2020, “said CARE Rating in October’s steel update report.
Regarding the prospects for the sector, the rating agency said that domestic steel production and consumption are expected to remain stable in the future in October-March (H2FY21). “For the entire fiscal year 21, we expect crude steel production to be 10-12% lower and consumption 14-17% lower, mainly affected by the poor first half. While the major players have reported a faster return to normal Covid-19, the recovery of smaller players is expected to be long and protracted due to their limited diversification and weaker financial flexibility, “he said.
Dear reader,
Business Standard has always endeavored to provide up-to-date information and feedback on developments that are of interest to you and that have broader political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only strengthened our determination and commitment to these ideals. Even during these difficult times arising from Covid-19, we remain committed to keeping you informed and up-to-date with credible news, authoritative opinions, and incisive commentary on relevant current affairs.
However, we have a request.
As we fight the economic impact of the pandemic, we need your support even more so that we can continue to bring you more quality content. Our subscription model has received an encouraging response from many of you, who have subscribed to our content online. More subscription to our content online can only help us achieve the goals of bringing you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital editor
.
