Notwithstanding the lacklustre performance in the March quarter, some of the leading steel company stocks have rallied on hopes revival in government spending in infrastructure to boost demand post-election.
Shares of Tata Steel has moved up 9 per cent to ₹164 on Friday against ₹150 a piece on March 1 even as it reported a 65 per cent fall in March quarter net profit and registered a net loss of ₹4,909 crore in FY24.
Similarly, JSW Steel net profit was down 65 per cent while that of SAIL was down 3 per cent in the March quarter. Jindal Steel and Power net profit doubled even as its income was down and this was largely aided by lower cost.
Despite weak performance, Tata Steel shares have moved up 9 per cent to ₹164 on Friday from ₹150 on March 1 and JSW Steel gained 5 per cent to ₹881 against ₹836. SAIL moved up 19 per cent to ₹158 from ₹133 while Jindal Steel and Power zoomed 25 per cent to ₹1,029 against ₹823 on March 1.
Vaibhav Jain at Share.Market Research said the below expectations financial performance of several steel companies have not been factored in the stock prices, which has made these stocks look overvalued.
Chinese dumping
Moreover, he said China dumping steel in India given its excess production could definitely suppress steel prices in the short term. “Our factor model indicates that these stocks are neither cheap nor excessively expensive. They are priced averagely compared to other opportunities in the market. However, this does not necessarily make them compelling immediate buy,” he added.
Arvinder Singh Nanda, Senior VP, Master Capital Services said there are valid concerns on the sustainability of current valuation levels, given the ongoing threat of Chinese steel dumping in India and the recent slowdown in demand. While the anticipated growth is promising, it is crucial to acknowledge the potential challenges and risks facing the sector.
The recent upsurge in steel stocks suggests investors are feeling optimistic about the future of these sectors with the projected steel demand growth of 5-7 per cent over the next 12-18 months on the back of resurgence in economic activity and infrastructure development, he added.