Metals, Mining Q1 Results Review— Inline Show; Tata Steel, JSW Steel, NMDC Among Systematix' Top Picks

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Systematix Report

Our coverage companies posted mixed earnings this quarter, broadly aligning with our expectations. Better steel prices supported topline and profitability growth for steel companies in Q1, while operating leverage, disciplined cost control, and robust domestic demand helped margin expansion.

JSW Steel (Buy), Tata Steel (Buy), and SAIL (Hold) reported a combined sales volume of 18mt during the quarter, registering 5% YoY growth. At the same time, Ebitda margins expanded by 269 bps YoY and 194 bps QoQ. In the steel pipes and tubes segment, Welspun Corp (Buy) exceeded expectations and delivered robust 40% YoY Ebitda growth led by capacity ramp-ups and favorable macros in key operating regions. APL Apollo Tubes (Hold) witnessed demand headwinds during the quarter led by widened Patra pipe spreads resulting in weaker realisations, offsetting product mix benefits, while Jindal Saw (Buy) posted weaker volumes due to various maintenance shutdowns.

Mining companies under our coverage posted mixed performance, where NMDC posted robust 6% YoY Ebitda growth while MOIL (Buy) and Coal India (Hold) posted a weak quarter due to lower offtake led by early onset of monsoon.

Non-ferrous companies posted stable volumes, and a better value-added product mix partially offset by lower commodity prices, translating to a 105bps/339bps (YoY/QoQ) Ebitda margin contraction.

Overall, every company in our coverage faces its unique challenges, from regulatory uncertainties to commodity price volatility. However, a select few have implemented effective measures to mitigate these risks, offering attractive multiples supported by resilient cash flows and strong balance sheets.

Our pecking order of top picks under our coverage is Welspun Corp., NMDC, Jindal Saw, Jindal Steel and Power, and Tata Steel.

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