What Earnings Of Smaller Metal Firms Indicate For Larger Peers
Smaller metal stocks have posted gains between 20% and 90% during the third quarter.
India’s smaller metal companies saw their revenue rise and margin expand in the quarter ended December as demand recovered after the nation lifted lockdown curbs, indicating that larger peers may follow suit.
“Led by a sharp increase in steel prices and lower coking coal costs, we expect Ebitda of our coverage universe to grow 62% sequentially and 211% year-on-year,” Prabhudas Lilladher said in its preview note for the metal sector. It expects steel realisations to rise by Rs 6,500 per tonne over the preceding three months.
Indian steel prices, according to Credit Suisse, had risen $100 per tonne in December. The research firm in its Jan. 7 note said it expects prices of the alloy to remain elevated.
Here’s how smaller metal companies fared during the quarter ended December...
Tata Steel BSL
India’s largest auto-grade steel maker reported a 17% rise in consolidated revenue over the year earlier to Rs 5,881.4 crore.
The company returned to profit in the third quarter with a net income of Rs 913.2 crore compared with a net loss of Rs 501.5 crore a year ago.
Its earnings before interest, tax, depreciation and amortisation jumped more than eightfold year-on-year to Rs 1,624.39 crore, while margin rose to 27.6% from 5.5%.
The company’s realisation improved 19% sequentially to Rs 51,185 per tonne, aided by higher steel prices and a better product mix, according to Motilal Oswal. Its Ebitda per tonne, too, was at an all-time high of Rs 14,153, the brokerage said.
Tata Metaliks
While the foundry grade pig iron maker’s revenue remained flat year-on-year at Rs 526.2 crore, it was in line with the consensus estimate of Rs 513.5 crore.
Lower expenses and finance costs aided the company’s operational performance and the bottom line. Net profit rose 64% to Rs 75.2 crore, compared with the Rs 34.4-crore forecast.
Ebitda, too, increased 64% over the year earlier to Rs 126.4 crore, more than double of the projected Rs 59.2 crore. Ebitda margin expanded over 900 basis points to 24%.
JSW Ispat Special Products
The maker of sponge iron, steel and ferroalloys saw its revenue double over the year earlier to Rs 1,160.7 crore. The company also returned to profit with a net income of Rs 29.8 crore compared with a net loss of Rs 137.1 crore a year ago.
Its Ebitda stood at Rs 151.8 crore against an operating loss of Rs 24.5 crore a year earlier, while margin was at 13.1%.
Vardhman Special Steels
The maker of special and alloy steels in India saw its revenue rise 53% over the year earlier to Rs 287.6 crore. Its net profit also increased to Rs 21.6 crore from Rs 1.8 crore a year ago.
Operating profit, or Ebitda, jumped more than sixfold to Rs 39.3 crore, while margin expanded to 13.7% from 3.1% a year ago.
Stocks During Q3
- Vardhman Special Steel: The stock rose 48.2% during the October-December period. Its currently trading near its 52-week high of Rs 135 apiece.
- JSW Ispat Special Products: The scrip gained 64% during the third quarter.
- Tata Metaliks: Shares rose 16.9% during the quarter ended December. It has nearly tripled from its 52-week low in March 2020.
- Tata Steel BSL: The stock posted gains of 90%.