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Stocks of major steel companies are seen bearish next week on expectations that earnings for Apr-Jun would be weaker compared with final quarter of 2012-13 (Apr-Mar). Seasonally, earnings for Jan-Mar are the highest in a financial year and so the Apr-Jun results being lower are not a surprise. Since the sentiment will drop, it will reflect in share prices of steel companies. Rise in volume of steel produced is also not expected to help companies as demand is relatively weak in the domestic market.
Volumes of Tata Steel or Steel Authority of India have outperformed government data of production growth, said ICICI Securities in its report. Tata Steel's volume grew 19% on year, while that of SAIL rose 14%. JSW Steel is expected to report a 4% year-on-year growth in Apr-Jun steel volumes. We expect sectoral earnings before interest, taxes, depreciation and amortisation to go down 15% year-on-year and 17% quarter-on-quarter.
Some are also of the view that the downside in select steel stocks may be limited next week following Karnataka Chief Minister K. Siddaramaiah's statement that the state government will shortly decide on new iron ore mining leases in the Bellary-Hospet region. JSW Steel and Kalyani Steel are among other primary steel producers that have interest in iron ore mines of Karnataka.
The Supreme Court in April allowed resumption of mining in 63 Category-B iron ore mines in the state, subject to reclamation, rehabilitation and compensation payments. After banning all mining activities in Karnataka's Bellary and Hospet regions in July 2011, the apex court had on Sep 3 last year partially lifted the ban by allowing conditional resumption of mining operations in category-A mines, where the Central Empowered Committee found no irregularities.
Stocks of major steel companies are seen bearish next week on expectations that earnings for Apr-Jun would be weaker compared with final quarter of 2012-13 (Apr-Mar). Seasonally, earnings for Jan-Mar are the highest in a financial year and so the Apr-Jun results being lower are not a surprise. Since the sentiment will drop, it will reflect in share prices of steel companies. Rise in volume of steel produced is also not expected to help companies as demand is relatively weak in the domestic market.
Volumes of Tata Steel or Steel Authority of India have outperformed government data of production growth, said ICICI Securities in its report. Tata Steel's volume grew 19% on year, while that of SAIL rose 14%. JSW Steel is expected to report a 4% year-on-year growth in Apr-Jun steel volumes. We expect sectoral earnings before interest, taxes, depreciation and amortisation to go down 15% year-on-year and 17% quarter-on-quarter.
Some are also of the view that the downside in select steel stocks may be limited next week following Karnataka Chief Minister K. Siddaramaiah's statement that the state government will shortly decide on new iron ore mining leases in the Bellary-Hospet region. JSW Steel and Kalyani Steel are among other primary steel producers that have interest in iron ore mines of Karnataka.
The Supreme Court in April allowed resumption of mining in 63 Category-B iron ore mines in the state, subject to reclamation, rehabilitation and compensation payments. After banning all mining activities in Karnataka's Bellary and Hospet regions in July 2011, the apex court had on Sep 3 last year partially lifted the ban by allowing conditional resumption of mining operations in category-A mines, where the Central Empowered Committee found no irregularities.
