Nerves of Steel: Tata Steel, JSW Steel realisation set to improve
Shares of steel companies rallied on Tuesday with the Nifty Metal index gaining over 3% as a further rise in steel prices going ahead are likely to boost their earnings.
Steel makers, after the significant outperformance over the past year, are set to witness a further upside in their valuations as risk-reward remains favourable.
The upward revisions in valuations are supported by the estimated Rs 10,000-12,000/tonne correction in steel prices versus spot. With domestic prices trading at a 10% discount to import parity, it is expected that the sharp correction is unlikely unless demand drops sharply.
Further, China’s focus on lowering emissions is likely to reduce production, and while its demand outlook is uncertain, supply cuts should support prices.
Indian steel companies earning estimates raised
mainly on better realisations.
Tata Steel, JSW Steel are expected to benefit from the changing global scenario.
Meanwhile, steel price hikes are expected to take effect in April.
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