JP Morgan overweight on Tata Steel possible Q3 earnings

JP Morgan feels that Tata Steel's possible Q3 earnings (to be announced on February 9) weakness is unlikely to materially impact the current rally (over40% year to date) in the stock.

While a headline loss (on restructuring charges) could cause some weakness, the broking firm expects Tata to bid up again, given the risk on trade, no macro shock in Europe, improving newsflow on European steel prices and still cheap valuations against MT.

India is where, the firm believes, investors need to focus on over the next 2-3 quarters as industry capacity increases, with a flatter cost curve and weak end demand.

JPM remains "overweight" and has revised its price target to 605 from the previous 630. JPM expects steel prices to remain supportive in H1, but macros hold the key. Key risk remains a sharp decline in India profitability on negation of iron ore advantage.