Tata Steel, Vedanta, SAIL, Hind Zinc: Metal stocks to buy with up to 110% upside potential

Indian metals and mining companies delivered a mixed performance in the third quarter of FY26, with Systematix Institutional Equities highlighting that the overall earnings largely aligned with expectations. The quarter was marked by significant divergence within the sector, as steel and non-ferrous companies showed margin resilience due to operational efficiency, while mining companies coped with ongoing volume and cost challenges.

According to Systematix, primary steel producers such as JSW Steel, Tata Steel, and SAIL saw aggregate sales volumes reach 21 million tonnes, representing a 9 per cent year-on-year (YoY) increase. This growth was driven by continued capacity expansions and robust demand from the infrastructure and automotive segments. However, despite the volume gains, sequential pressures emerged on realisations due to softer hot rolled coil (HRC) prices and higher imports.

Ebitda margins for steel producers expanded by 231 basis points year-on-year but contracted by 58 basis points quarter-on-quarter (QoQ). Systematix notes that JSW Steel maintained its margin resilience through a strengthened value-added product mix and scale efficiencies, even as blended realisations fell and coking coal costs rose. Tata Steel recorded strong YoY earnings growth, buoyed by cost transformation initiatives and better Netherlands operations profitability.

SAIL delivered notable earnings growth supported by debottlenecking activities and inventory liquidation, but its margin profile remains structurally lower than its steel peers. Looking forward, Systematix expects multiple price hikes announced post-safeguard duty implementation to support spreads in the fourth quarter. Nonetheless, factors such as rising coking coal costs and the pace of import flows will remain critical.

The steel pipes and tubes segment displayed a mixed quarterly outcome. Welspun Corp Ltd outperformed peers, delivering 25 per cent and 42 per cent YoY increases in revenue and Ebitda, respectively. This was attributed to a superior product mix and healthy execution across regions. APL Apollo Tubes Ltd posted robust results, with a 10.7 per cent YoY volume growth and Ebitda per tonne of Rs 5,146, despite lower HRC prices.

Jindal Saw Ltd experienced year-on-year margin pressure due to subdued domestic spending in key government schemes, but a sequential recovery signalled probable bottoming out of profitability in Q2FY26. Systematix highlights that order book visibility in India and UAE operations brings near-term stability, while a sustained revival in government capex is essential for future growth.

In mining, the quarter was weak overall. NMDC Ltd recorded a 10 per cent YoY decline in Ebitda, mainly due to higher royalty expenses. MOIL and Coal India both faced lower volumes and realisation, as indicated by Systematix. Recovery in volumes was more visible sequentially for NMDC and Coal India Ltd, but margins remain largely dependent on dynamics of volume and cost absorption.

Non-ferrous companies under Systematix's coverage posted the strongest quarterly earnings growth. Hindustan Zinc Ltd and Vedanta Ltd reported robust results, supported by higher prices for zinc, silver, and aluminium along with lower costs of production that aided margin expansion. Nalco saw sequential improvement on the back of higher aluminium premiums and alumina volumes, while Hindalco maintained steady upstream performance in India.

Systematix Institutional Equities has indicated its preferred picks in the sector based on current performance and outlook. The top recommendations are Welspun Corp, Vedanta, NMDC and Tata Steel, reflecting a bias towards companies with operational resilience and strong product mix.

Analysts at Systematix expect near-term earnings to be shaped by realisation trends, raw material costs, and the momentum in domestic demand. They emphasise the importance of cost optimisation and capacity additions for steel names, while margin and volume recovery remain contingent on policy actions and commodity price trends for mining players.

From the metal pack, it has a 'buy' rating on Tata Steel Ltd (Target Price: 230), NMDC (Target Price: 95), Nalco (Target Price: 436), Vedanta (Target Price: 898), Hindustan Zinc (Target Price: 755), APL Apollo Tubes (Target Price: 2,393), Jindal Saw (Target Price: 235), Jai Balaji Industries (Target Price: 133) and Welspun Corp (Target Price: 11,157), suggesting up to 110 per cent upside potential.

Systematix has given a 'hold' call on JSW Steel (Target Price: Rs 1,162), Steel Authority of India (Target Price: Rs 138), Coal India (Target Price: Rs 371), Moil (Target Price: Rs 392) and Hindalco (Target Price: 840).