Nonferrous Metals & Mining
Retain Attractive View; Hindalco Moves to OW
Investment conclusion: We are upgrading Hindalco
from EW to OW and retain our OW call on Sterlite
although we see some downside risk in next 3-6 months.
We remain positive on copper, coal and iron ore
dynamics but are less optimistic on aluminum and zinc
even though we do expect some upside in the next 3-4
quarters.
Our global mining team has tweaked up its base
metals and bulk materials price forecasts for F11- F13
by 1% -11%. We believe that economies in the West are
recovering, albeit slowly, and that China will continue to
grow at a sturdy pace thus keeping up metal demand on
an upward trajectory. Limited supply growth for copper
and coal, high import demand from China on iron ore
and the continued absence of a substantial portion of
aluminum from usable inventories globally (due to their
possible relocation into physically backed funds) are
some of the reasons that prompt our positive stance on
metals prices despite a strong trailing price action in the
past 2-3 months.
Hindalco (OW) is now our top pick in the space: The
fast pace, ahead of our earlier expectations, of
Hindalco’s three Greenfield projects, further progress on
a brown field smelter expansion( which we are now
including in our model) and sturdy Novelis earnings
trends prompt our upgrade on Hindalco. We raise our
price target from Rs172 to Rs257.
Sterlite (OW): Our base case value indicates upside but
news flow may cause volatility near term. We cut our
price target from Rs222 to Rs214.
Sesa Goa (++): We raise our EPS estimates due to
(a) changes in volume assumptions – we have reduced
our volume assumption for F11 to take into account the
continued ban on iron ore transportation in Karnataka,
and (b) the inclusion of Cairn Energy acquisition in
4QF11.
No comments:
Post a Comment