Vedanta, VAML, Tata Steel, NMDC, JSPL, Gravita: Q2 results preview, share price targets 

In its September quarter preview note on metals & mining sector, ICICI Securities said realisations may weigh on sector performance, with ferrous players to perform slightly better than non-ferrous players. Tata Steel Ltd, SAIL Ltd and Vedanta Ltd are likely to outperform, ICICI Securities said adding that NMDC has likely bottomed out.

Among ferrous players, ICICI Securities said Tata Steel is expected to outperform in Q2 on stronger flat-steel realisations, higher India volumes, captive raw material (RM) and some improvement in the Netherlands business, partially dragged by the UK’s operations.

SAIL is seen witnessing its sharpest volume growth, more than compensating for Ebitda per tonne (Ebitda/t) loss. JSPL is expected to be the laggard with volume gains falling short of expectations and a potential hit on realisations.

Q2 earnings season can emerge a mixed bag for non-ferrous companies, as aluminium LME prices fell 10 per cent QoQ, while zinc (up 10 per cent QoQ) and copper (up 5 per cent QoQ) reported increase.

"Therefore, aluminium companies such as VAML, NALCO and Hindalco may see their operating performance declining (albeit moderately), partially due to a higher cost profile (coal cost increasing). Vedanta is expected deliver an outperformance aided by higher zinc prices," ICICI Securities said.

It said Vedanta’s Ebitda is expected to rise 9 per cent QoQ to Rs 9,140 crore. Hindalco’s consolidated Ebitda is seen falling 13 per cent QoQ to Rs 12,110 crore, while Vedanta Aluminium Ltd (VAML) Ebitda is likely to remain relatively resilient.

Mining earnings are expected to moderate sequentially, led by lower volumes. NMDC’s volumes could dip 11 per cent QoQ to 10.5mt, with Ebitda receding 16 per cent QoQ to Rs 2,070 crore, as lower volumes and higher royalty costs offset improved EBITDA/t, ICICI Securities said.

"Lloyds Metals’ iron-ore and pellet volumes are estimated at 5.5mt and 4.5mt, respectively, resulting in an Ebitda of Rs 2,310 crore, down 17 per cent QoQ. In recycling, Gravita and Jain Resource Recycling could remain relatively resilient on stable volumes and value-added product," it said.

Share price targets

In the ferrous segment, the brokerage has a 'Buy' rating on Tata Steel with a target price of Rs 235 and an 'Add' rating on SAIL with a target price of Rs 185. It has a 'Buy' rating on JSPL with a target price of Rs 1,254, an 'Add' rating on SMEL with a target price of Rs 1,170, and an 'Add' rating on Jindal Stainless with a target price of Rs 875.

In mining, ICICI Securities has an 'Add' rating on NMDC with a target price of Rs 95.

In the non-ferrous segment, the brokerage has a 'Hold' rating on Lloyds Metals And Energy Ltd with a target price of Rs 1,948, a 'Buy' rating on Vedanta with a target price of Rs 345, a 'Hold' rating on NALCO with a target price of Rs 400, and a 'Buy' rating on Hindalco with a target price of Rs 1,200.

Among recyclers, it has a 'Buy' rating on VAML with a target price of Rs 520, a 'Buy' rating on Jain Recycling with a target price of Rs 350, and a 'Buy' rating on Gravita India with a target price of Rs 2,020. In the pipe segment, ICICI Securities has an 'Add' rating on APL Apollo with a target price of Rs 2,080.