Tata Steel, a major steel producer, is expected to report a significant year-on-year (YoY) drop in its profit for the June quarter. Analysts estimate that the profit could decline by up to 95% compared to the same period the previous year. This decline is likely to be driven by several factors:
- Sales Decline: Tata Steel’s sales are expected to decrease by approximately 6-11% in the June quarter compared to the same quarter last year. The decline in sales could be attributed to weak demand and challenging market conditions.
- Losses in Europe: Tata Steel’s European operations are likely to contribute to the decrease in profit. Weak demand and higher costs in the European market may result in losses for the company’s European operations.
- Partial Offset: The impact of the declining profit could be partially offset by improved sequential realizations. Sequentially, the company may have witnessed better pricing for its products, which could provide some support to its financial performance.
The steel industry, like many other sectors, can be influenced by various economic and market factors, including global demand and supply dynamics, input costs, and trade policies. As a result, companies like Tata Steel may experience fluctuations in their financial performance based on these variables.
JM Financial, metal names, including Hindalco, JSPL (Jindal Steel and Power Limited), and Tata Steel, have reacted positively to the anticipated demand uptick in China. The positive sentiment is despite the fact that the actual demand green shoots are yet to be observed on the ground. The note suggests that China has remained active in export markets, with year-to-date (YTD) exports up by 35% compared to the previous year.
JM Financial maintains a constructive outlook on the metals sector and recommends Hindalco, JSPL, and Tata Steel as its preferred picks in the space. This positive stance could be influenced by various factors, including potential demand recovery, infrastructure spending, and global macroeconomic trends.
