Tata Steel, JSW Steel, JSPL see healthy earnings pipelinethough steel price hikes take pause impacted by festival season
- Stock Market today- The steel price hikes that continued during Q2 have taken some pause post onset of festive season. However, higher Q2 exit prices are likely to keep earnings prospects intact feel analysts, who also anticipate some price hikes post end of festival season.
The steel prices that had continued to rise regularly during the September quarter have seen a pause in the price hikes during the festive season. A slowdown in buying activity, due to Diwali holidays, higher imports, a notable absence of mills from export markets, and customers adopting a more need-based approach to purchasing, has contributed to sustained pressure since 6 Oct’23, said analysts at Motilal Oswal Financial Services.
The pause in the prices will add to some concern in the near term, as is in the back of festival season impacting demand. Nevertheless analysts maintain a positive outlook on steel demand as infrastructure spending will continue supporting volume growth in 2023 and 2024 too Analysts also expect legs to steel prices as the Diwali festival ends.
Moreover the exit steel prices at the end of September quarter remained higher that they were at start of Q2. This will mean that the higher raw material costs as that of coal will be taken care through higher steel prices.
The Q2 performance had remained and had seen significant earnings upgrades for JSW Steel Tata Steel as per MOFSL review. The analysts have said that Jindal Steel and Power has guided for an improvement of 2-3% in Average selling price in 3QFY24, driven by improved demand in the domestic market. Tata Steel on the other hand expects ASP to improve by ₹2,000-2,200 per tonne for its domestic operations. Tata Steel while expects coal Costs to rise by $10 a tonne during Q3, JSW Steel expects its coal costs to rise $20-30 a tonne while Jindal Steel and Power expects coal costs to $50-60 a tonne as per analysts. Hence higher average selling price will be important for profitability.
Analysts maintained positive view as those at JM Financials Institutional Securities post Q2 results have said that Steady performance by Indian operations is likely to continue for Tata Steel in domestic operations. For JSW Steel JMFL analysts had said that strong growth pipeline and increased focus on cost efficiency augurs well for the company. For JSPL JMFL maintained positive outlook and said that with a strong balance sheet to support growth, increasing raw material security, and low cost of production, JSP remains well positioned to withstand cyclical challenges
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