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Prabhudas Lilladher Report
We expect our metals coverage universe to report weak performance in Q4 FY24 with revenue/Ebitda/profit after tax growth of ~8%/1%/-4% QoQ (-3%/-4%/- 17% YoY) given falling steel prices and higher coking coal prices.
Domestic demand improved sequentially in this quarter, however imports inched up again in January which affected steel pricing. Average net sales realisation for domestic companies declined 3-5% QoQ while input costs such as coking coal and iron ore inched up in this quarter.
Flat Steel prices continue to remain sluggish while Long product prices have improved from early March. Coking coal prices have declined sharply (-28%) from early March which is expected to benefit steel player from June onwards.
Companies are expected to attempt smaller price hikes in flat steel as well however, it would depend on import intensity. Imports have reduced since January.
Key monitorables to watch out are-
Government of India's stand on rising imports,
sustenance of coking coal prices at lower levels,
progress on capex and
demand indicators from China and developed countries.
Our top picks are Hindalco Industries Ltd. and Jindal Steel and Power Ltd.
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