June 25, 2019 / 5:35 AM / 4 months ago

BUZZ-India steel sector under pressure, domestic demand softens - CLSA

** Indian domestic steel demand has softened in recent months, led by funding constraints in govt-led infrastructure projects around general election - CLSA Research

** Adds an uptick likely to happen only by Dec quarter

** Indian hot-rolled coil steel prices have corrected about 4% since Jan, but are still at ~6% premium to landed free trade agreement imports; could fall further unless global prices improve - CLSA

** Valuations for Indian steel companies are at steep premium to global peers despite much higher leverage - CLSA

** Enterprise value/EBITDA multiples of global steel companies have come down to ~4x from 5-6x historically

** Rising iron ore prices are seen as beneficial for Tata Steel’s backward-integrated India business but have not manifested in higher steel prices

** Margins at the European steel industry have declined sharply, given Tata’s JV with Thyssenkrupp is not going through

** CLSA reiterates “sell” on Tata Steel, JSW Steel (Reporting by Harish Bhaskar in Bengaluru)

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