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We recently met a large cross section of domestic investors. On metals, the mood
is clearly bearish with many investors currently NOT owning any metal stocks
while most of them OWN cement equities. 3 most discussed names remain
TATA, JSPL (NR) and HNDL. Detailed company wise feedback is as follows.
‘Would buy higher on clarity/visibility’: Is the common feedback we have
received in our recent domestic investor meetings. Many of the investors
currently DO NOT OWN any metal equities, but are unwilling to add exposure
given the global uncertainty and are willing to buy at higher levels once global
macro becomes more certain/stable. The few investors who have added through
the current correction have only looked at TATA/JSPL/HNDL (one of the 3).
Cement is a consensus Buy/Hold among investors we met.
TATA- Just too many concerns on Europe, though agree on strong India
profitability: Tata Europe remains the No. 1 concern for investors and there is
no conviction of TATA Europe remaining EBITDA positive if things really
deteriorate in Europe. On the other hand, most agree that India EBITDA would
remain resilient and do not see it falling below $350/MT next year. The worry
remains as to can TATA fund its capex program at Orissa in a period when
TATA Europe is making losses, even with strong India operations. There is also
a concern on the Pension obligations in TATA Europe. However, TATA
remains the top stock people want to add on any global macro improvement. In
our view, continued strong India EBITDA over the next 3 quarters should bring
more investors to the stock as long as Europe is positive EBITDA.
JSPL (NR) Worries on execution/other risks, but admirers of power
project/coal resources remain: Investors who own JSPL see this as a derived
coal play given India’s coal problems. However, there are increasing
concerns/questions on JSPL’s potential execution risks on the upcoming
power/steel projects and whether there can be further delays from here.
HNDL- Seen as the most defensive, but no catalysts for the next 18 months:
Investors remain confident on the US subsidiary cash flows even in a
constrained demand environment as cans are seen as more defensive in nature.
However, there are concerns on the Mahan/Utkal project commissioning
timelines and lack of catalysts in terms of volume growth for the next 18
months. We sense more interest on any further stock correction from here given
the earnings resilience and the belief that aluminum remains a commodity with a
floor price nearer to current price as the cost curve has shifted higher.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We recently met a large cross section of domestic investors. On metals, the mood
is clearly bearish with many investors currently NOT owning any metal stocks
while most of them OWN cement equities. 3 most discussed names remain
TATA, JSPL (NR) and HNDL. Detailed company wise feedback is as follows.
‘Would buy higher on clarity/visibility’: Is the common feedback we have
received in our recent domestic investor meetings. Many of the investors
currently DO NOT OWN any metal equities, but are unwilling to add exposure
given the global uncertainty and are willing to buy at higher levels once global
macro becomes more certain/stable. The few investors who have added through
the current correction have only looked at TATA/JSPL/HNDL (one of the 3).
Cement is a consensus Buy/Hold among investors we met.
TATA- Just too many concerns on Europe, though agree on strong India
profitability: Tata Europe remains the No. 1 concern for investors and there is
no conviction of TATA Europe remaining EBITDA positive if things really
deteriorate in Europe. On the other hand, most agree that India EBITDA would
remain resilient and do not see it falling below $350/MT next year. The worry
remains as to can TATA fund its capex program at Orissa in a period when
TATA Europe is making losses, even with strong India operations. There is also
a concern on the Pension obligations in TATA Europe. However, TATA
remains the top stock people want to add on any global macro improvement. In
our view, continued strong India EBITDA over the next 3 quarters should bring
more investors to the stock as long as Europe is positive EBITDA.
JSPL (NR) Worries on execution/other risks, but admirers of power
project/coal resources remain: Investors who own JSPL see this as a derived
coal play given India’s coal problems. However, there are increasing
concerns/questions on JSPL’s potential execution risks on the upcoming
power/steel projects and whether there can be further delays from here.
HNDL- Seen as the most defensive, but no catalysts for the next 18 months:
Investors remain confident on the US subsidiary cash flows even in a
constrained demand environment as cans are seen as more defensive in nature.
However, there are concerns on the Mahan/Utkal project commissioning
timelines and lack of catalysts in terms of volume growth for the next 18
months. We sense more interest on any further stock correction from here given
the earnings resilience and the belief that aluminum remains a commodity with a
floor price nearer to current price as the cost curve has shifted higher.
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