Tata Steel, Vedanta, NMDC, JSPL: Q3 a mixed bag for metals & mining sector; here's earnings preview

In its Q3 preview note on metals & mining sector, Nuvama Institutional Equities expects non-ferrous companies to gain from higher commodity prices, but believes it would be a mixed quarter as far as the profitability of ferrous players are concerned. The domestic brokerage prefers NMDC, Jindal Steel & Power Ltd (JSPL) and Vedanta Ltd.

While coking coal cost dipped $20–25 per tonne QoQ in Q3, iron ore cost rose Rs 300–400 per tonne QoQ during the same period. Nuvama is expecting companies such as Jindal Steel & Power Ltd (JSPL) and SAIL Ltd (longs, over 50 per cent of volume) to post higher Ebitda per tonne, and JSW and Tata Steel (with flats volume of 75–80 per cent) to record a decline in profitability.

NMDC Ltd is likely to outperform due to higher prices as well as volume. Coal India's Ebitda would decline YoY due to lower e-auction prices, Nuvama said.

Hindalco
Nuvama expects Ebitda of the Aluminium segment, including Utkal Alumina, to increase 24 per cent QoQ to Rs 4,790 crore, supported by higher aluminium prices (up 8 per cent QoQ) and alumina prices (up 38 per cent QoQ), along with marginally higher volumes (up 0.9 per cent QoQ at 336kt).

Copper Ebitda is likely to be lower at Rs 650 crore (down 21 per cent QoQ). Novelis’s adjusted Ebitda per tonne is likely to drop 16 epr cent QoQ to $410 due to lower scrap spread amid tight scrap availability. The Switzerland plant flooding in the previous quarter will have minor impact in Q3FY25, the brokerage said, noting that the company has restarted operations.

Hindustan Zinc
Hindustan Zinc's Ebitda is expected to rise 8.6 per cent QoQ. Higher zinc volume (up 3 per cent QoQ), zinc price (up 10 per cent QoQ) and silver price (up 7 per cent QoQ) are likely to be only partially offset by lower lead and silver volume. Cost of production ex-royalty for zinc is expected to be flat QoQ.

Vedanta
Vedanta is expected to report an Ebitda increase of 7 per cent QoQ due to higher base metal prices, particularly aluminium and zinc (up 8–10 per cent QoQ). Higher alumina cost shall increase aluminium CoP by 9 per cent QoQ, Nuvama said adding the cost was under control in zinc.

"We expect iron ore Ebitda to surge 73 per cent QoQ due to a 45 per cent QoQ increase in volume," it said.

Tata Steel
Tata Steel's standalone Ebitda per tonne is expected to decline Rs 1,760 QoQ to Rs 11,375, owing to decrease in blended realisation, partially offset by lower coking coal price (down $20 per tonne QoQ).

"Tata Steel Europe’s losses are expected to decrease owing to lower raw material cost and fixed cost at UK, partially offset by decrease in steel prices in Netherlands. The Netherlands operations are expected to report an EBITDA loss while UK losses are likely to decrease QoQ," it said.

JSW Steel
For JSW Steel, Nuvama expects Ebitda per tonne of Rs 7,318, down Rs 1,439 per tonne QoQ, owing to lower steel prices (down Rs 2,400 per tonne QoQ), partially offset by lower coking coal prices. Volume is likely to increase 6 per cent QoQ to 5.62 mt.

Jindal Steel
JSPL's Ebitda is likely to increase 5 per cent QoQ on the back of lower coking coal cost by $25 per tonne and other cost benefits, partially
offset by lower realisation (down Rs 1,650/tonne QoQ). Sales volume is expected to be flat QoQ. Consolidate Ebitda per tonne is likely to increase Rs 620 to Rs 12,102, Nuvama said.

SAIL
Nuvama expects SAIL to slip into a net loss. It expects adjusted EBitda per tonne of Rs 4,197, up Rs 1,106 QoQ (Q2 included prior-period rail price revision benefit) and decrease in coking coal cost by $20 per tonne QoQ. The net realisation/t is expected to decrease by Rs 900 QoQ while volume is likely to increase by 4 per cent QoQ to 4.26 mt.

NMDC
Nuvama expects NMDC to report an Ebitda of Rs 2,430 crore, up 20 per cent YoY. It is factoring in an Ebitda per tonne of Rs 2,038, up Rs 256 per tonne YoY on the back of increased prices (realisation up Rs 742 per tonne YoY to Rs 5,422 per tonne supported by higher volume (up by 5% YoY to 11.9mt). However, higher royalty cost is likely increase CoP/t by Rs 417 YoY.