Tata Steel and Hindalco Industries emerged as the top gainers in Nifty 50 in Monday’s intraday trades after global brokerage Jefferies upgraded these shares to ‘Buy’ from ‘Hold’. Tata Steel is Jefferies’ top pick in the Indian metal space, followed by Hindalco Industries.
The shares of Tata Steel gained 5.05% to reach an intraday high of ₹ 118.40 apiece on the National Stock Exchange (NSE). Meanwhile, Hindalco Industries gained 3.16% to reach an intraday high of ₹ 488.35.
In fact, Nifty Metal gained a whopping 2.40% to reach a record high of 6884.60 points after Jefferies turned positive on Indian metals after almost a year of cautious view.
“China has unveiled a comprehensive plan to support the property markets and has set a new direction for the Covid policy to stabilize the economy which, along with other stimulus measures, should drive a recovery in metal demand in 2023. Weakening US and EU macro poses a risk to the global metal demand, but a potential improvement in China and strong demand in India could provide an offset,” it said.
The brokerage had turned cautious on the Indian Steel industry in January 2022 as it believed that the earnings cycle was inflexion-down while the market was too optimistic about a China stimulus. It finds the landscape flipped now, with easing policies in China.
Jefferies believes that a sequential improvement in the quarterly EBITDA trend for Tata Steel/Hindalco in 2023 will help drive stock performance. Further, while metal prices and spreads might remain volatile near-term, it believes the big correction is behind, and any positive macro developments in China could provide an upside.
Tata Steel
It has a buy rating on the shares of Tata Steel with a target price of ₹ 150. This translates to an upside of 26.47% as compared to its share price of ₹ 118.60 apiece.
Tata Steel is a large-cap company with a market capitalization of ₹ 1,37,697 crores. It has an excellent return on equity of 42.56% and an ideal debt-to-equity ratio of 0.81. Further, its shares are trading at a price-to-earnings ratio of 4.80, which is higher than the industry average of 10.31, indicating that the stock might be undervalued and its share price might increase in the future.
Hindalco Industries
Further, it has a buy rating on the shares of Hindalco Industries with a target price of ₹ 600.00. This implies an upside of 23.04% as compared to its share price of ₹ 487.65.
Hindalco Industries is a large-cap company with a market capitalization of 1,06,014 crores. It has an ideal return on equity of 19.62% and an ideal debt-to-equity ratio of 0.74. Further, its shares are trading at a price-to-earnings ratio of 7.61, which is higher than the industry average of 10.31, indicating that the stock might be undervalued and its share price might increase in the future.
Written by Simran Bafna
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