Tata Steel, JSPL, Hindalco: JM Financial shares top 3 metal picks

JM Financial is positive on Indian steel companies, as it sees margin expansion in the June quarter, supported by better realisations following the imposition of a 12 per cent safeguard duty and a decline of $10–15 per tonne in P&L coking coal consumption cost, as guided by major companies.

The domestic brokerage said Indian steel companies arguably have a relatively better spot margin construct than non-ferrous peers, given the recently imposed import duty. It cited reports suggesting the government may raise the safeguard duty further to 24 per cent, providing additional support to domestic producers.

Jindal Steel and Power (JSPL) and Tata Steel among steel players, and Hindalco Industries among non-ferrous metal players, remained its top picks in the metals space. The brokerage suggested 'Buy' ratings on all the three stocks, with target prices of Rs 180 on Tata Steel, Rs 800 on Hindalco Industries and Rs 1,020 on JSPL, respectively.

"Realisations for Indian steel players are expected to witness an uptrend in 1Q with the recently imposed 12 per cent safeguard duty on flat products in April. Average domestic HRC prices came in at Rs 51.8k/t, an increase of Rs 3k/t compared to Q4. Longs prices increased to Rs 43.8k/t, up Rs 1k/t compared to 4Q. NMDC announced a price hike (Rs 440/t) and a price cut (Rs 150/t) in May and June respectively," JM Financial said. 

Steel companies guided for a $10-15 per tonne decline in coking coal consumption cost for June quarter. Consequently, Indian ferrous players are likely to witness an Ebitda per tonne expansion to the tune of Rs 2,000 per tonne in Q1 given higher realisations and lower coking coal costs, partially offset by high iron ore prices and lower scale, JM said.

"Operating leverage is usually lower in 1Q compared to a seasonally strong 4Q. JSPL (lowest leverage, highest volume growth over next few years) and Hindalco remain our top picks in the space," JM said.

Globally, China's  domestic HRC prices witness correction in Q1 with spot prices at $445 per tonne, down $22 per tonne compared with Q4 driven by oversupply amid subdued domestic demand. China rebar prices currently trade at $465 per tonne, down $20 per tonne compared to Q4. 

"China’s steel exports for CY24 surged to 111 million tonnes (up 22 per cent YoY) and exports for April 2025 came in at 10.5 million tonnes (up 13 per cent YoY) thereby further weighing on global steel prices. China recently announced its intention to reduce domestic steel production; any meaningful implementation of this measure could support prices," it said.