Stocks of steel companies are seen rangebound next week in the absence of any stock-specific triggers and will track key indices. The market trend will mainly depend on Reserve Bank of India's first-quarter monetary policy review on Tuesday. This week, Jindal Steel and Power and JSW Steel reported their Apr-Jun earnings. Jindal Steel's earnings were hit mainly due to a provision of 5.74 bln rupees on account of impairment of its investment in Bolivia. Earlier this month, the company terminated its iron ore mining and steel manufacturing projects in Bolivia terming its government non-investor friendly. The company's consolidated net profit fell 59% on year to 3.85 bln rupees while net sales rose 18.9% on year to 46.80 bln rupees.
Considering the delay in projects, heightened regulatory risks and uncertainty on international operations. JSW Steel reported a sharp 90% year-on-year decline in consolidated net profit at 500 mln rupees due to foreign exchange and associate company losses. However, strong sales volume and realisation lifted consolidated net sales by 33% on year to 99.02 bln rupees. Despite iron ore shortage the company posted a strong operational performance. The company's consolidated operating profit was up 33% on year at 19.1 bln rupees. JSW Steel's FY13 EBITDA estimate by 8% on strong Apr-Jun margin performance.
The structural story (of the company) remains clouded by possible delays in ramp-up of mining in Karnataka, high operating and financial leverage further weakened by structural weakness in global steel margins, and possible headwind of JSWS-Ispat Industries' merger. The market will now await earnings of Tata Steel and Steel Authority of India scheduled over the next fortnight, which will decide the trend for the steel stocks going forward. Steel companies will continue to face subdued demand over the next two to three months due to poor monsoon and macro economic uncertainties. JSW Steel's Commercial Director Jayanat Acharya expects demand to revive in the second half of the current financial year. He expects prices to remain stable in the next few months.
(www.rupeedesk.in)
