Metals, Mining Q3 Results Review - A Toast To The Dark Horses: ICICI Securities

ICICI Securities Report

Q3 FY23 was a revival quarter for smaller companies under our coverage with APL Apollo Tubes Ltd., Jindal Stainless Ltd. and National Aluminium Company Ltd. faring relatively better. Key highlights:

• Ebitda/tonne for ferrous companies was up Rs 3,000 on an average;

• reduced cost of both thermal and coking coal aided margins;

• net debt/Ebitda rose for almost all the companies; and

• street raised the valuation multiples of all the companies.

Going ahead, we believe volume for ferrous companies is likely to grow 12-15% QoQ in a seasonally strong quarter; however, margin might remain range-bound owing to the surge in coking coal cost.

Non-ferrous companies, on the other hand, are likely to enjoy margin expansion owing to London Metal Exchange zinc and LME aluminium being up 10% and 8%, respectively QoQ, lower e-auction prices and increased linkage coal materialisation.

While the street has made 12-15% cut in FY23E Ebitda for Tata Steel Ltd. and NALCO, we believe Q4 FY23 implied Ebitda for Jindal Steel and Power Ltd. is quite low at Rs 24.2 billion (up 1.9% QoQ).

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