Shares of Tata Steel, JSW Steel and Hindalco Industries are in focus today after foreign brokerage Jefferies suggested 'Buy' ratings on two of these three stocks, while staying constructive on the metals sector's prospects.
The brokerage has upped target price for Tata Steel to Rs 180 from Rs 165 earlier. The target price for JSW Steel has also been revised to Rs 920 from Rs 850 earlier, but Jefferies continued to maintain a 'Hold' on this stock. The foreign brokerage believes that steel stocks are expensive but felt the valuations may sustain going ahead, saying Asian steel spread is 20 per cent below the long term average and that it has scope to expand going ahead.
The brokerage noted that India steel prices are up 4 per cent from December trough and a safeguard duty should provide further support, lifting margins and valuations.
On Hindalco, the brokerage maintained a target price of Rs 800. Jefferies said aluminium prices are holding up well and thar Hindalco's valuations at 1.1 times estimated FY26 book value for a 13 per cent return on equity (ROE) look reasonable.
The brokerage noted that China recovery and safeguard duty expectations in steel have lifted investor sentiment, as metals stocks outperformed Nifty by 15-20 per cent year-to-date.
In a recent note on steel sector, Emkay Global said the consensus appears to be taking a slower approach to revisiting earnings for the sector with shallower cuts at the time of quarterly results in order to reflect the slower recovery in prices and delay in projects.
"We do see a case for safeguard duty reversing India’s recent shift, to being a net importer of steel from being a net exporter historically. In addition, we believe large-scale expansions necessitate some amount of government support, and the industry has been vocal about the possibility of recalibrating the expansion plans in the absence of favorable government intervention. However, the duration and quantum of such duty remains uncertain," it said.
This brokearge felt that there is a possibility that the current earnings expectations might not sustain. "Our sense is that steel equities could struggle to perform in the face of negative earnings momentum. Nevertheless, we expect shallow cuts that the market appears to be willing to absorb and look through," Emkay said.
On Hindalco, JM Financial said LME alumunium prices may stay rangebound at $2.6k/t levels in FY26, benefitting Hindalco.
"With LME prices at USD2.6k/t+ and company guidance for Novelis Ebitda/tonne to be in the vicinity of $500/tonne for 4QFY25, Hindalco remains our preferred play in the aluminium space with a good earnings visibility for the next 6 months. Major customers for Novelis have also guided for strong demand in CY25 driven by higher demand for beverage cans in Europe and South America. Competitors for Novelis have also hinted towards better demand in the packaging sector in CY25," it said.
JM Financial said the outlook for Hindalco continues to remain buoyant given a resilient performance by India aluminium operations, high run rates in the copper business, enhanced coal security post acquisition of Meenakshi, Meenakshi west and Chakla coal mines.