INSUBCONTINENT EXCLUSIVE:
Subdued demand as well as volatile prices will likely weigh on earnings of metal companies for the third quarter of the ongoing financial
year (Q3 of FY23), Bloomberg consensus estimates for the period show.
Year-on-year (YoY) net sales growth will be flat in Q3, Bloomberg data
shows, while the bottom line will decline sharply by 60.4 per cent from a year ago.
Earnings before interest tax depreciation and
amortisation (Ebitda) will fall by almost 42.1 per cent versus a year ago.
The data has been compiled from a sample size of the top-10 metal
firms, including Tata Steel, Hindalco, JSW Steel, Vedanta and Hindustan Zinc.
Sector experts say that while the price of coking coal, used
in making steel, has fallen nearly 31 per cent to $205 per tonne in Q3, the price of iron ore, which is also a key input in steel making,
has risen by 26 per cent in the quarter under review
This mixed commodity trend will keep earnings muted, analysts at Mumbai-based brokerage Centrum said in their report dated January
The impact on margins would largely be driven by weaker steel prices and subdued exports
analysts Rahul Jain and Shweta Dikshit at Mumbai-based brokerage Systematix Institutional Equities said in their report dated January
14.
Steel export duty has been withdrawn since the end of November and it has reduced for iron ore from 50 per cent to 30 per cent
This will aid exports and cash generation in the forthcoming quarters, Jain and Diskshit said.
Base metal prices such as aluminium, zinc,
copper, nickel and lead, on the other hand, have climbed by 8-36 per cent in Q3 due to the re-opening of the Chinese market after a
But at a broader level, sentiment remains weak as concerns around a global recession continue to weigh on demand and prices of non-ferrous
continue to play out as far as the earnings of metal companies in Q3 are concerned
The good news is that domestic demand continues to be strong
This could aid earnings to some extent
However, global benchmark prices of base metals on the London Metal Exchange will remain volatile
at Centrum Broking said about the sector's earnings in the quarter under review.ChartFor individual metal companies, the picture will remain
mixed, Bloomberg consensus estimates show.
Tata Steel is likely to report a YoY decline in net sales by nearly 6 per cent, while net profit
will fall nearly 80 per cent from a year ago.
Aditya Birla group flagship Hindalco, on the other hand, may see a marginal rise in net sales
by 3.5 per cent, but the decline in net profit will be sharp at nearly 45 per cent, Bloomberg data shows.
Vedanta may see net sales remain
flat versus a year ago in Q3
The bottom line may decline by 52.6 per cent versus last year, Bloomberg data shows.
Hindustan Zinc, which is part of the Vedanta group, may
see net sales fall marginally from a year ago, though net profit drop will be sharper at nearly 23 per cent
