Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
Union Budget
Budget 2011-2012 Home
Industry Expectations - Budget 2011-2012
Industry Reactions - Budget 2011-2012
Budget 2010-2011
Budget 2010-2011 Home
Industry Expectations - Budget 2010-2011
Industry Reactions - Budget 2010-2011
Contributor's Corner
Bonanza Portfolio
Hemant K Gupta
Krish Bhatt
S A A R T H I
Trinity Investments
Exchange Information
BSE 2009 Holidays
NSE 2009 Holidays
Investor Guide
Depository & Dematerialisation
Grievance Redressal
Investor Guide
SEBI
Trading of Securities
Transfer of Securities
Your Rights
Budget 2009-2010
Budget 2009-2010 Home
Industry Expectations - Budget 2009-2010
Industry Reactions - Budget 2009-2010
Interim Budget 2009-2010 Home
Industry Expectations - Interim Budget 2009
Budget 2008-2009
Railway Budget 2008-2009
Industry Expectations - Budget 2008
Union Budget 2008-2009
Highlights of Budget 2008-2009
Summary of Budget 2008-2009
Industry Reactions - Budget 2008
IPOs
Current IPOs
Past IPOs
IPO Subscription
Mutual Funds
Gold Exchange Traded Fund
MF Unique Holding
Forthcoming Dividends
ELSS Schemes Comparison
Tax Plans
New Fund Offers
Research
Arbitrages
Equity
Market Whispers
Tax Planning
Home
Equity Linked Savings Scheme
Post Office MIS
9% GOI Senior Citizens Savings Scheme
8% Savings (Taxable) Bonds
Kisan Vikas Patra
National Savings Certificate
Public Provident Fund
Research

| More

Metals & Mining (Attractive): 4QFY17 preview-when it shines the most - Kotak

Posted On: 2017-04-12 21:50:05

Domestic metal names, both ferrous and non-ferrous will report strong earnings courtesy higher metal prices and strong volumes from ramp-up of projects. The earnings improvement of steel names will be led by higher volumes (peak seasonal demand & new projects) though we expect steady operating margins (as coal costs rise as well) while non-ferrous names will see their margins improving on the back of higher base metal prices (+6 to 10% qoq). We prefer VEDL, TATA, JSTL and JSP—strong volume growth and deleveraging are common themes we expect from these names.

Ferrous—steel price increase to offset coking coal cost increases; expect steady margins

We expect the sequential increase in domestic steel prices (and export prices) to more than offset cost increases for domestic steel makers—cost increases largely relate to higher coking coal costs (lagged effect of inventories) & iron-ore. We expect blended realizations of domestic steelmakers to increase by Rs2,000-2,500/ton qoq—prices have increased for both flats as well as long products. Domestic steel demand remained subdued and increased by 3% yoy for April- February 2017. The steelmakers, though gained from decline in imports and increasing exports, given steady global steel markets and decline in China exports; steel imports to India for April - February 2017 declined by 38% yoy to 6.6 mn tons while exports increased by 77% yoy to 6.6 mn tons—India's net imports declined from 7 mn tons last year to nil this year.

This has helped domestic steelmakers raise production by 12.5% yoy to 76.6 mn tons. Moreover, the increase in volumes is largely led by large names including Tata Steel, JSW Steel, Essar Steel as they gain market share from smaller players who suffer liquidity issues.

Non-ferrous—strong price increases and volume to aid earnings improvement

Non-ferrous names will report strong earnings on the back of higher base metal prices and volumes—base metal prices increased by 7-11% qoq led by zinc (+11% qoq) and aluminum (+8% qoq). Higher prices combined with increase in mined metal volumes (+13% qoq) will aid strong sequential improvement in earnings for Hindustan Zinc (+29% qoq, +174% yoy) and Vedanta (+22% qoq, +112% yoy)—Vedanta will also benefit from the ramp-up of its aluminum smelters. We expect Hindalco's EBITDA to increase by 28% qoq led by higher aluminum prices partially offset by increase in costs. We expect Nalco's EBITDA to increase by 72% qoq, led by higher alumina prices (+15% qoq) and higher alumina shipments.

4QFY17 earnings—a good quarter for steel names

A combination of higher seasonal 4Q volumes and marginal increase in sequential EBITDA/ton by 1-4% qoq will result in 9-28% qoq (71-105% yoy) increase in EBITDA steel names. We expect Tata Steel to report its highest quarterly net income (adjusted) in the past 12 quarters.

- Tata Steel. We expect consolidated EBITDA to increase by 28% qoq to Rs45.2 bn (+105% yoy) and net income of Rs10.2 bn (Rs1.5 bn in 3QFY17). Tata Steel's India steel deliveries increased 17% yoy to 3.19 mn tons in 4QFY17 from the ramp-up of KPO. We expect India EBITDA/ton to increase by 2% qoq to Rs11,550/ton (+45% yoy) aided by higher steel realizations (+Rs2,500/ton qoq) partially offset by increased coking coal costs. Improving cost structure from KPO ramp-up will also aid margins. We expect Europe EBITDA/ton to increase to US$60 (US$38/ton EBITDA in 3QFY17) from improved spreads.

- JSW Steel. We expect consolidated EBITDA to increase 9% qoq to Rs31.2 bn (+71% yoy). We build in 6% qoq increase in steel deliveries to 3.85 mn tons (+17% yoy). We expect flat EBITDA/ton qoq at Rs7,800 (+44% yoy) as higher steel prices will offset coking coal cost increase. We estimate net income of Rs9 bn (+24% qoq, Rs1.7 bn in 4QFY16).

- Jindal Steel & Power. We expect JSP's consolidated EBITDA to increase by 9% qoq to Rs14.2 bn (+72% yoy). We expect standalone EBITDA to increase 17% qoq to Rs9.2 bn (+53% yoy). We model steel deliveries of 950,000 tons (-5% yoy, +13% yoy). We expect steel EBITDA/ton to increase 4% qoq led by higher realizations as coking coal cost impact will be low for JSP. Jindal Power's generation was flat at 2,400 mn units (+2% yoy). We estimate Jindal Power's EBITDA of Rs2.4 bn (+75 % yoy, -21% qoq). We estimate consolidated net loss at Rs4 bn (net loss of Rs4.1 bn in 3QFY17).

- NMDC. We estimate EBITDA to increase by 40% qoq to Rs14.4 bn (+166% yoy)—the sharp improvement in earnings is led by higher volumes as well as improved realizations. NMDC's iron ore sales increased 14% yoy to 9.8 mn tons (-3% qoq) aided by higher sales from Chhattisgarh, Karnataka mines and higher export sales. We expect iron-ore realizations to increase 15% qoq to Rs2,870/ton led by increase in domestic iron-ore prices as well as higher export realizations. We estimate net income of Rs9.9 bn (+49% yoy, +24% qoq). Non-ferrous companies—strong quarter led by higher metal prices, volumes

- Vedanta. We expect EBITDA to increase by 22% qoq to Rs73.5 bn (+112% qoq). The sequential improvement in EBITDA is led by (a) Hindustan Zinc (Rs35.9 bn, +29% qoq) from higher volumes, prices, (b) aluminum (Rs9.7 bn, +49% qoq) from smelter ramp-up, higher aluminum prices, and (c) iron-ore (Rs5.8 bn, +22% qoq) from increased Goa volumes on revised production cap. We estimate Cairn India's EBITDA at Rs11.4 bn (+5% qoq, +113% yoy). We estimate net income of Rs26.4 bn (+42% qoq).

- Hindustan Zinc. We expect HZ's EBITDA to increase by 29% qoq to Rs35.9 bn (+174% yoy, +29% qoq). HZ's mined metal volumes increase by 13% qoq to 312,000 tons (+66% yoy) aided by Rampura Aguhca mine production; zinc production increased to 215,000 tons (+5% qoq, +40% yoy) and lead production is at 45,000 tons (+15% qoq, +17% yoy). Higher zinc prices (+11% qoq) and lead prices (+7% qoq) will aid earnings as well. We estimate net income to increase by 38% yoy to Rs29.6 bn (+28% qoq).

- Hindalco. We expect standalone EBITDA to increase by 28% qoq to Rs15.2 bn (+30% yoy). We model aluminum deliveries of 320,000 tons (+3% qoq) from ramp-up of new smelters. Standalone aluminum costs may increase due to higher transfer prices of alumina led by increase in benchmark alumina prices. We expect aluminum EBITDA of Rs11.7 bn (+33% qoq) and copper EBITDA of Rs3.7 bn (+12% qoq). The sequential improvement in aluminum earnings is led by higher prices (+8% qoq). We estimate net income of Rs5.9 bn (+66% yoy).

At Novelis, we expect adjusted EBITDA before metal price lag at US$261 mn (-6% yoy, +2% qoq). We expect volumes to decline 2% yoy and EBITDA/ton to decline 3% yoy due to lower South America EBITDA (given appreciation of BRL:USD rate).


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Views on LIC Housing Finance Limited 4QFY2017 Results: Angel Broking
Wipro - Q4FY17 Result Review - Kotak Securities Limited
Views on Wipro Limited 4QFY2017 Results: Angel Broking
Axis Bank - Q4FY17 - Worst for the bank could get over in near term, better days ahead: Angel Broking
Ultratech Cement - Q4FY17 Result Review - Kotak Securities Limited
HDFC Bank back on growth trajectory: Angel Broking
Sun Pharmaceutical US Update: Angel Broking
Global ambiguity sizzles; Base metals' rally fizzles: Angel Broking
Asset quality a negative surprise form Yes Bank: Angel Broking
Heavy weight banks look a good bet: Angel Broking
Banks: Tightening the screws - Kotak
Utilities: The supply glut - Kotak
Insurance: Ending a strong year on a stronger note - Kotak
TCS - Q4FY17 result review - Kotak
Views on Tata Consultancy Services Limited 4QFY2017 Results: Angel Broking
Strategy: Small need not be beautiful - Kotak
Indiabulls Real Estate restructures to create value: Angel Broking
Infosys Q4 2017 results - Dipen Shah, Sr. Vice President - PCG Research, Kotak Securities Limited
Views on Infosys Ltd 4QFY2017 Results: Angel Broking
Infosys - 4QFY2017 Result Preview: Angel Broking
Energy: Weaker end to a subdued year - Kotak
Apex court disallows rise in imported coal tariff, though awards compensation for lack of domestic coal
Utilities: Supreme Court-denies compensation, but with a rider - Kotak
Strategy: The curious case of the Indian market - Kotak Institutional Equities
Economy: INR: Appreciate, for now, but be cautious - Kotak Institutional Equities
Energy: OMCs — Refining - marketing - Kotak Institutional Equities
Cement: Earnings weakness persists - Kotak Institutional Equities
Fall in IT conglomerates evened out by Banking counters: Angel Broking
Shankara Building Products lists at a healthy premium to issue price: Angel Broking
USFDA action on Indoco Plants: Angel Broking
Karur Vysya Bank - Easing troubles to pave way for growth: Angel Broking
Navin Fluorine International - The unique chemistry of growth: Angel Broking
Dr Reddy's inks distribution pact with Integra Life Sciences: Angel Broking
BS-IV rollout expected be neutral on the automobile sector: Angel Broking
Shankara Building Products Ltd - IPO Note - Sushil Finance
'R' for RERA - for Realty coming to Reality soon: Angel Broking
Reliance Capital - Refurbishing core; monetisation crucial; company update; Buy - Edelweiss
D-Mart delights its investors: Angel Broking
Shankara Building Products Limited - Thrust on retail to boost potential: Angel Broking
Impact of Rupee Strength on IT and Pharma: Angel Broking
Idea Surges 12% on the back of positive news flows: Angel Broking
Sun Pharmaceutical - USFDA to Lift Import Alert Regulator to permit supply of products from Mohali: Angel Broking
IT Update - Ban on premium processing of H1-B visas: Angel Broking
Tech Mahindra - Acquires CJS Solutions in US: Angel Broking
Dr. Reddy's Laboratories - Gets USFDA observation for Duvvada oncology formulation Facility: Angel Broking
VIP Industries - Travelling smart on the luggage track: Angel Broking
Avenue Supermarts - IPO Note - Numero Uno! - Reliance Securities
IT Update: Ban on premium processing of H1-B visas: Angel Broking
DATA WARS BEGIN... AND THE WINNER IS: THE DATA CONSUMER: Angel Broking
Auto sector shifting gears, Feb volumes indicate fast recovery in sight: Angel Broking


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2017