Metals under pressure, Tata Steel, JSW Steel and Hindalco decline up to 3%

According to news reports, CLSA has cut FY20-21 earnings per share (EPS) estimates by 9-38 per cent factoring in lower commodity prices and stronger rupee.

Shares of Tata Steel, Hindalco and JSW Steel slipped in the morning trade on Wednesday after reports said foreign brokerage firm CLSA has downgraded the stocks saying deteriorating Chinese demand outlook will weigh on commodity prices. 

At 11:09 am, shares of Tata Steel were trading nearly two and a half per cent lower at Rs 503 apiece on BSE while those of JSW Steel were trading at Rs 294, down over 3 per cent. Hindalco, too, was trading over two and a half per cent lower at Rs 217 apiece on BSE. 

According to news reports, the brokerage firm has cut FY20-21 earnings per share (EPS) estimates by 9-38 per cent factoring in lower commodity prices and stronger rupee.

Chinese domestic spot HRC (hard-rolled coil) prices and export HRC prices have both declined by nearly 15 per cent over the last three months to $542/ton and $495/ton respectively, impacted by potential disruptions due to the trade war, lower than expected winter production cuts and slowdown in domestic demand, according to a report by Antique Broking. 

World Steel Association (WSA) expects Chinese steel demand to be flat in 2019 in the absence of any major stimulus measures that were seen in H12018 particularly for the real estate sector, the report added. 

CLSA has downgraded Tata Steel to ‘Sell’ from ‘Buy’ and has slashed the target price to Rs 460 from Rs 855, earlier. Similarly, JSW Steel has been downgraded to ‘Sell’ from ‘Underperform'. Also, the target price has been reduced Rs 260 from Rs 375, as per the reports. Hindalco has been downgraded to ‘Sell’ from ‘Underperform’ and the target price has been revised to Rs 210 from Rs 255. 

For Q2FY19, Tata Steel posted profit of Rs 3,604.2 crore. It had reported PAT of Rs 976 crore in the corresponding quarter of previous year, mainly due to the inclusion of Bhushan Steel and its financials into its books. The company also reported an exceptional gain of Rs 163.7 crore versus a Rs 44.65 crore loss in the year-ago period. Revenue rose 34.1 percent to Rs 43,544.1 crore on a yearly basis. Analysts tracked by Bloomberg projected the figure at Rs 40,806 crore. 

In the current financial year 2018-19 (FY19), the stock has declined around 10 per cent.

JSW Steel had reported a 150 per cent jump in its net profit at Rs 2,087 crore for the second quarter of FY18. The stock has surged over 5 per cent in the current financial year. Aluminium major Hindalco had posted a 54 per cent YoY jump in its net profit at Rs 725 crore for the said period. 

The Nifty Metal index was trading nearly 2 per cent lower as compared to 0.3 per cent fall in the benchmark Nifty50 index.