'Tata Steel to gain from price rebound'
Prabhudas Lilladhar sees Tata Steel, JSW Steel and Steel Authority of India benefiting from the rebound in steel prices in the international market after three months of decline.
By INDIATIMES NEWS NETWORK |
MUMBAI: Prabhudas Lilladhar sees Tata Steel, JSW Steel and Steel Authority of India benefiting from the rebound in steel prices in the international market after three months of decline.
Hot rolled coil prices in the US have reportedly been raised by $5 per tonne compared to the $65 per tonne slide in the past three months. Similarly, cold rolled coil prices have also registered their first increase by $5 per tonne after $66 per tonne slide in the last three months, the brokerage says quoting World Steel Dynamics data.
Currently average HRC price in Europe is around $670 per tonne and CRC price is at $766 per tonne. CRC prices in Europe have increased over the last one and half months by $20 per tonne.
“We believe Arcelor Mittal’s US operations is likely to take a lead and announce a hike of around $20 per tonne for flat products, followed by other steel mills in the US. Low service center inventories and decline in imports from China are also reflecting the favorable condition that the US markets expect in the second half of 2006-07,” the brokerage says.
“Tata Steel, by virtue of acquiring Corus, is now operationally more leveraged than its peers in India. A leveraged play in rising steel pricing scenario will likely result in strong profit growth for the consolidated entity. At current market price of Rs 660, the stock is trading at 6.9 times 2008-09 (Apr-Mar) fully diluted earnings per share of Rs 95. We believe the stock has the potential to achieve a price to earnings ratio of 8 times in line with the valuations of European steel manufacturers given that Corus is at the highest end of product mix in steel.”
At 2:37 pm, Tata Steel share was at Rs 686.25, up 4.40 per cent from previous day’s close on the Bombay Stock Exchange. “We maintain our buy recommendation on JSW Steel with a target of Rs 790 based on 7 times 2008-09 fully diluted EPS of Rs 113. We have not factored any upside from the recent acquisition of the US operations of Jindal Saw, which we believe will likely be EPS accretive in 2008-09.” At 2:37 pm, JSW Steel share was at Rs 632, up 2.31 per cent from previous day’s close on the Bombay Stock Exchange.
Hot rolled coil prices in the US have reportedly been raised by $5 per tonne compared to the $65 per tonne slide in the past three months. Similarly, cold rolled coil prices have also registered their first increase by $5 per tonne after $66 per tonne slide in the last three months, the brokerage says quoting World Steel Dynamics data.
Currently average HRC price in Europe is around $670 per tonne and CRC price is at $766 per tonne. CRC prices in Europe have increased over the last one and half months by $20 per tonne.
“We believe Arcelor Mittal’s US operations is likely to take a lead and announce a hike of around $20 per tonne for flat products, followed by other steel mills in the US. Low service center inventories and decline in imports from China are also reflecting the favorable condition that the US markets expect in the second half of 2006-07,” the brokerage says.
“Tata Steel, by virtue of acquiring Corus, is now operationally more leveraged than its peers in India. A leveraged play in rising steel pricing scenario will likely result in strong profit growth for the consolidated entity. At current market price of Rs 660, the stock is trading at 6.9 times 2008-09 (Apr-Mar) fully diluted earnings per share of Rs 95. We believe the stock has the potential to achieve a price to earnings ratio of 8 times in line with the valuations of European steel manufacturers given that Corus is at the highest end of product mix in steel.”
At 2:37 pm, Tata Steel share was at Rs 686.25, up 4.40 per cent from previous day’s close on the Bombay Stock Exchange. “We maintain our buy recommendation on JSW Steel with a target of Rs 790 based on 7 times 2008-09 fully diluted EPS of Rs 113. We have not factored any upside from the recent acquisition of the US operations of Jindal Saw, which we believe will likely be EPS accretive in 2008-09.” At 2:37 pm, JSW Steel share was at Rs 632, up 2.31 per cent from previous day’s close on the Bombay Stock Exchange.
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