UBS upgrades ratings on Tata Steel, JSW Steel

UBS upgrades ratings on Tata Steel, JSW Steel

Mumbai: UBS has upgraded its ratings on steel stocks — and — from ‘neutral’ to ‘buy’ as the domestic businesses of both the companies reported their highest ever operating profit in the December quarter. The brokerage increased its price target for JSW from Rs 310 to Rs 500 and for Tata Steel from Rs 415 to Rs 900.

Tata Steel shares ended at Rs 704.95 and JSW Steel closed at Rs 423.15 on Thursday, almost unchanged from the previous day. The Sensex and Nifty fell over 1 per cent on Thursday.

“Steel realisations remain high with price hikes (amid tight supply and high raw material costs), robust domestic demand and high international prices,” said UBS in a report to clients. “We expect peak margins in FY22, and gradual normalisation as new capacity comes online.”

JSW shares have gained 202 per cent and Tata Steel shares have jumped 178 per cent since April 3, 2020 — when both stocks started their rebound.

UBS said the India steel sector has rebounded strongly from Covid-19 disruption with domestic demand recovery led by the auto sector and government’s infrastructure pipeline

“While the JSW stock has rallied in line with sector, we upgrade JSW to buy, due to its status as a pure play on India steel cycle, and its expansion project/margin improvement initiatives nearing completion,” said UBS.

“For Tata, despite the stock recently outperforming the sector, valuation multiples lag historical averages, and with European operations’ turnaround and domestic iron-ore integration, we also upgrade Tata to buy,” the brokerage said.

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