MUMBAI: The outlook for the Indian steel sector is bright with key brokerages hiking target price and upgrading stocks on the back of strong demand and rising prices.
In the past few days, Morgan Stanley has upgraded the ratings of Jindal Steel to overweight from underweight and increased the target price to Rs 188 from Rs 174. It also upgraded the ratings of JSW Steel and Sail to equalweight from underweight and increased the target price of JSW Steel to Rs 296 from Rs 278 and Sail from Rs 53 to Rs 54. Goldman Sachs also upgraded the ratings of JSW Steel to buy from neutral with a target price of Rs 315.
Analysts increasingly feel that large steel stocks currently trading at marginal discounts to long term average EV/EBITDA could be best bets. “Indian steel industry on the cusp of a multi-year run,” said Chetan Phalke, CIO – Alpha Invesco. “It’s a time to take a contrarian bet due to strong domestic steel prices, rising capacity utilizations, de-leveraging of the balance sheets and governments anti-dumping duties till 2022”.
Jindal Steel & Power, Tata SteelNSE 1.00 %, JSW Steel and Sail have underperformed the Sensex between 15 per cent and 50 per cent in the past one year. These stocks now trade between 5 and 6 times FY 2019 estimated EV/EBITDA as against the historical average of 7x.
Contact Person: Mr. Olen Yu
Tel: 86-27-8544 8800