Tata Steel Ltd, Hindalco Ltd and APL Apollo Tubes Ltd are Axis Secuities' top conviction stocks within the metals & mining sector. It said market dynamics will be shaped by multiple factors, including the potential announcement of a 25 per cent safeguard duty on steel imports in India, further Chinese stimulus measures, and the evolving impact of US tariffs on steel and aluminium. Additionally, Fed rate cuts and geopolitical shifts could influence metal pricing trends, the brokerage said.
For Hindalco, strong domestic aluminium business is seen offsetting global volatility. Axis Securities suggested a 'Buy' and a target of Rs 710. On APL Apollo Tubes, it sees Ebitda per tonne rebounding, as demand normalises. The brokerage suggested a target of Rs 1,750. For Tata Steel, it suggested a target of Rs 155. Tata Steel's India operations performing better than anticipated. If the government announces a 25 per cent safeguard duty on steel imports, Tata steel will be the beneficiary, the brokerage said.
On steel sector, Axis Securities believes the industry is set for a marginally better Q4FY25, aided by improved pricing scenarios and lower input costs. It noted that LME aluminium prices averaged $2,577/t in Q3FY25, up 17 per cent YoY, driven by tight supply and firm alumina costs.
"Chinese refinery curtailments and bauxite shortages in Guinea have fuelled higher alumina prices, though a supply rebalancing in 2025 is expected. The recent 25 per cent tariff on aluminium imports to the US is reshaping global trade flows, boosting the local Midwest premium in US," it said.
On Hindalco, Axis Securities noted that the management envisaged double-digit IRR and has plans to complete the upstream expansion projects with a Net debt to Ebitda of 1-1.5 times. "In our view, Hindalco’s capital allocations towards upstream assets look well placed, given its strong Indian balance sheet and robust domestic demand," it said.
With the recent correction in stock price, Axis Securities sees an opportunity for a fresh entry in Tata Steel. The brokearge said Ebitda per tonne loss at UK narrowed by £114 per tonne to £121 per tonne in Q3 sequentially, aided by fixed cost take-out programs, yielding £146 per tonne cost saving and offsetting the £31 per tonne drop in the realisations.
"On an absolute basis, there has been an improvement in fixed costs by about £70 million QoQ, mainly in relation to maintenance costs, employment costs, and operating charges upon closure of heavy-end assets in the UK," it said.
To cater to the East Indian market, two of APL Apollo's greenfield plants are coming in Siliguri and Gorakhpur and one plant in Bangalore for a lighter section.
"These three plants will provide an incremental market of 1.5 MTPA, which will be ramped up in the next 2-3 years. The company is also focusing on international markets with the commencement of the Dubai plant -- operating at 58 per cent utilisation. APL Apollo has also received orders in Saudi Arabia," Axis Securities said.