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News Topical, Digital Desk : The stock market has once again witnessed good news regarding the metal sector. Global brokerage firm Jefferies has identified a good opportunity to invest in steel companies. In particular, positive reviews have been given for JSW Steel and Tata Steel.
According to brokerages, the shares of these two companies have fallen by 9-10% following the escalating tensions in West Asia. Surprisingly, steel prices in India have risen by approximately 6% during this same period. This means there's a gap between the share price and the actual volume, which is being considered a good investment opportunity.
Jefferies believes these companies are poised to see strong earnings growth in the future. It estimates their EBITDA (profit) could increase by 30% to 45% by fiscal 2027.
The brokerage cites three key reasons:
First, the balance between demand and supply of steel is improving in China. Production there has declined by 9% in the past few months, and exports have also decreased. This is reducing supply in the global market.
Second, steel margins in Asia are improving. Margins that were previously very low are now gradually increasing. This could have a positive impact on companies' earnings.
Third, and more importantly, steel prices in India are expected to rise further. According to Jefferies, steel prices could reach around ₹64,900 per tonne in the future, which is significantly higher than current levels.
However, some risks remain. If tensions in West Asia continue for a long time, it could impact demand. However, the brokerage notes that prices, not just sales volumes, have a greater impact on companies' earnings. Overall, despite the current decline, the steel sector appears to offer good investment opportunities.
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