Metal, Mining Companies May Benefit From Rising Prices In Q4
Across-the-board price rise and higher volumes are expected to benefit metals and mining companies in the fourth quarter ended March. Aluminium, steel, zinc, lead and copper prices have gone up by 20-65 percent over a year ago.
Revenue of five metal and mining sector companies is expected to jump 28 percent year-on-year in the fourth quarter of financial year 2016-17. Net profit is expected to rise 57 percent and the earnings before interest, depreciation and amortisation (EBITDA) may increase by 50 percent, according to Bloomberg consensus estimates.
Tata Steel has been excluded from the list as the company posted a net loss of Rs 3,214 crore in the fourth quarter of year ended March 2016.
- Volumes are expected to increase 20 percent over the last year to 3.9 million tonnes on account of increased capacity at Vijaynagar and JSW Ispat, and aggressive marketing efforts within India and overseas.
- Rise in volumes is expected to be partially offset by increased coking coal costs and higher iron ore prices.
- Consolidated EBITDA per tonne is expected to be Rs 7,330 crore.
- Domestic steel demand growth, steel price hikes and impact of rising coking coal costs will be the key things to watch.
- Domestic volumes are expected to increase 17 percent over the year-ago period to 3.17 million tonnes, aided by contribution from Kalinganagar. The volumes will also increase by 6 percent sequentially due to a lower base.
- European steel volumes are expected to rise 5 percent compared to the previous quarter to 2.5 million tonnes.
- Standalone EBITDA/tonne may rise by close to 40 percent year-on-year to Rs 11,400 per tonne, and is expected at around $58 per tonne for the European division on higher steel spreads.
- Clarity on imports from China, global iron ore prices, restructuring of the European business, pension liability and high debt will be the key things to watch for.
- The rising spot coking coal prices are less likely to have an impact as 40 percent of coking coal sources are integrated.
- Hindalco is expected to report a strong quarter with support from higher aluminium and copper prices, which will boost segment results and improve realisations.
- Standalone EBITDA is expected to rise 30 percent over the same quarter last year. Aluminium volumes are expected at 3.2 lakh tonnes, while copper volumes are expected at 1 lakh tonnes.
- Foreign exchange rate impact on Novelis and coal costs will be the key things to track.
- Consolidated EBITDA is expected to increase 107 percent to Rs 7,184 crore on the back of higher prices and volumes in zinc, aluminium and crude oil.
- Gains from higher prices and volumes will be partially offset by higher alumina cost.
- Update on commissioning 1.25-million-tonnes-a-year smelter and price movement of base metals are the key factors.
- Coal India is expected to report a good performance, led by higher sales volumes of more than 150 million tonnes.
- Fuel supply agreement realisations are estimated to rise 3 percent year-on-year to Rs 1,392 per tonne, and e-auction realisation is estimated to increase 10 percent to Rs 1,723 per tonne.
- Employee cost movement, e-auction volumes and realisations and global coal prices would be the key things to watch.
(These expectations have been compiled from reports by Emkay Global, HDFC Securities, Centrum, Kotak Institutional Equities and Motilal Oswal)