Tata Steel is Jefferies’ Top Pick in Indian Metals, Bearish on JSW Steel

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Tata Steel is Jefferies’ Top Pick in Indian Metals, Bearish on JSW Steel
Credit: © Reuters.

By Malvika Gurung

Investing.com -- Metal majors Tata Steel (NS: TISC ) and Hindalco (NS: HALC ) are trading as top gainers on the headline index Nifty50 , while Tata Steel is the best performer on Sensex .

The two stocks are surging after the global brokerage and research firm Jefferies turned positive on Indian metals after remaining cautious in the space for about a year.

The global brokerage has upgraded the ratings on the two metal biggies from ‘Hold’ to ‘Buy’, stating that the worst-margin quarter for the Indian steel sector and a ‘big chunk’ of earnings cuts for Tata Steel and Hindalco are left behind.

Tata Steel is Jefferies’ top pick in the Indian metals space, followed by Hindalco.

On Tata Steel, the research firm said that its price to book (PB) and enterprise value (EV) are close to its long-term averages, which are attractive parameters amid the company’s improving asset footprint and balance sheet.

Jefferies finds the valuations attractive for the Tata company despite higher ROE, a rising share of higher-margin India business in volumes and continued deleveraging. It has set a target price of Rs 150/share, an upside of 33.15% from the previous session close.

Shares of Tata Steel surged 4% to Rs 117.1 apiece at the time of writing on Monday.

On the country’s biggest aluminium manufacturer Hindalco, Jefferies said that the stock is reasonably priced at 1.1x FY24 PB and 1.1x FY24 EV/IC against a long-term average of 0.8x PB.

“We find the landscape flipped now with China policies turning supportive and the big earnings cut for Tata Steel and Hindalco behind. We believe a sequential improvement in the quarterly EBITDA trend for Tata Steel and Hindalco in 2023 will help drive stock performance,” it said.

The brokerage has set a target price of Rs 600/share on Hindalco, an upside of 26.75% from the previous close.

Further, Jefferies has an ‘Underperform’ rating on JSW Steel (NS: JSTL ) as it finds the stock’s valuation expensive.

Read Also: Tata Steel Top Gainer, Miniratna MOIL (NS: MOIL ) Shines: Monday’s Metal Rally Driver?

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