May 8, 2018 / 5:22 AM / 2 months ago

BUZZ-Indian steel stocks not yet factoring in spread expansion - Macquarie

** Macquarie says domestic steel prices to remain on an uptrend with further hikes in May 2018

** Deutsche Bank (DB) says Indian steel companies raised domestic steel prices by $12-$15 per tonne in May 2018

** Adds rising domestic steel prices and declining raw material prices have resulted in Indian steel spreads increasing by 18 pct over last three months

** Macquarie says stocks are not yet factoring in the spread expansion and upside risk in earnings

** DB says rising spreads on the back of increasing demand will help domestic steel players achieve robust profitability and JSW Steel Ltd is its preferred pick in the sector

** Macquarie believes Tata Steel Ltd offers best risk reward, adding cost inflation impacts co the least

** Adds with stronger prices and downtrending raw material prices, Q1 2019 margins could see another $20/tonne Q-o-Q expansion and drive earnings upgrades

** Macquarie retains ‘outperform’ on Tata Steel and JSW steel; DB maintains ‘buy’ on JSW Steel

** 23 of 32 analysts covering JSW Steel rate it “buy” or higher with a median PT of 323.50 rupees, while 25 of 30 analysts recommend ‘buy’ or higher rating for Tata Steel with median PT of 818.94 rupees, according to Thomson Reuters data

** Tata Steel has lost about 10 pct this year up to Monday’s close, while JSW Steel has gained about 21 pct

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