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Anand Rathi Report
Domestic steel sector expected to outpace real GDP. While many headwinds plague the global commodity sector, the home market features a stark contrast. The steel sector is expected to outpace real GDP growth in the long run (an 8-10% CAGR over FY24-30). ~210 million-220 million tonnes of steel are expected to be produced by FY30, and ~190 million-210 million tonnes consumed.
Headwinds in China persist. A few global companies and commodity experts say offtake in China is considerably lower than expected.
The piecemeal stimulus by the Chinese government over the last few quarters has not led to a meaningful revival in the sector and, unless the government undertakes a substantial stimulus, the near-term outlook will be bleak.
Considering subdued demand in its home market, ~120 million tonnes of Chinese steel exports (direct + indirect) are expected in CY24 (Jan-Aug'24 exports increased 19% y/y to 70.72 million tonnes).
Against the backdrop of robust domestic steel demand and capacity added, we retain JSW Steel/JSPL (initiating coverage) as Buys with target prices of Rs 1,080/1,115. We initiate coverage of SAIL/Tata Steel with Hold ratings and Rs 140/160 target prices.
We have evaluated tier-I ferrous manufacturers on a peer set matrix covering expansion plans, net debt, share of value-added products and exports, raw material integration, ratios, etc.
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