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Metal & Mining

Metal & Mining

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Published by: bhaskarbhuwan on Jan 26, 2010
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 Metals & Mining
 November 11, 2009
   K   S   L  –   S  e  c   t  o  r   U  p   d  a   t  e
For private circulation only. Please read the Important Disclosure at the end of the report.KSL Intelligent Research Reports can be accessed on: www.bloomberg.net (KHDS<GO>), www.thomsonreuters.com, www.capitaliq.com,www.themarkets.com, www.kslindia.com, www.moneycontrol.com, www.securities.com, www.valuenotes.comThis report is intellectual property of Khandwala Securities Ltd; queries on this report may be directed to Head of Research at research@kslindia.com
 Poised for Muscular Growth
 
Giriraj DagaTel No.:
+91 22 4076 7332
Email:
giriraj@kslindia.com
 
Khandwala Securities Limited
 KSL – Metals & Mining Sector Update November 11, 2009 2
T
ABLE OF
C
ONTENT
 
Sl No Descriptions Pg No
1. Key Highlights 32. Industry Overview 33. Financial Summary 54. Steel Prices65. Raw Material Prices86. Production Data97. Non-Ferrous Metal Prices128. Other Parameters139. Quarter at a Glance1410. Industry Aggregate Financials1611. Sector Analysis for 2QFY101712. Net Sales Growth2113. EBITDA Growth2114. PAT Growth2215. EBITDA Margins2216. PAT Margins2317. Companies’ 2QFY10 Result Update24
 ArcelorMittal USA Inc.
25
Hindalco Industries Limited
28
Hindustan Zinc Limited
36
 JSW Steels Limited
40
National Aluminium Company Limited
47
Sesa Goa Limited
51
Steel Authority of India Limited
56
Sterlite Industries Limited
60
Tata Steel Limited
6518. Financial Highlights7119. Disclaimer74
 
Khandwala Securities Limited
 KSL – Metals & Mining Sector Update November 11, 20093
Key Highlights
 
Gradual improvement in steel production across the globe
 
Demand stable in domestic market
 
Global steel prices subdued last month
 
Domestic steel prices lowered in current month
 
Non-ferrous metal prices stable
 
China continues to throw positive surprises
 
Valuation (Top Pick: Tata Steel, JSW Steel & Sterlite Industries)
Industry Overview
 As mentioned in our previous sector update ‘Off the Crisis, Geared toTakeoff’, the 2QFY10 proved to be steady compared to 1QFY10. Although,YoY quarterly performance looks dismal considering metal prices were at alltime high during 2QFY09, the sector has shown substantial improvementfrom sequential quarter on back of improving realization and moderate costenvironment. The global scenario now looks much more convincing thanprevious in the quarter and companies, like ArcelorMittal, are witnessingsteady improvement in capacity utilization, which is likely to extend duringthis quarter. Indian metal sector is likely to achieve stable demandenvironment; however, the financials from YoY perspective would be verystrong on account of very low base in 3QFY09 due to complete collapse ofglobal economic growth.
Gradual improvement in steelproduction across the globe
 The steel industry is witnessing steady improvement in production acrossthe globe and global production touched the highest mark of 107 MT duringpast 12 months in the month of Sep’08. A very large portion of this growthwas driven by China, which now produces ~ 48% of global steel comparedto ~ 36% in the month of Sep’08. Apart from this, the developed countrieshave also shown steady improvement in the last couple of months on back ofeasing recessionary pressures and re-stocking. Steel production in the monthof Sep’09 jumped 44%, 36% and 27% from Mar’09 level in Japan, US andEurope respectively. We believe, the de-stocking exercise is by and largeover and industry would be looking at follow on consumer demand forfurther expansion in steel production.
Demand stable in domesticmarket
 The Indian steel demand has remained on uptrend albeit at a lower pace,while non-ferrous metal demand has witnessed robust growth on back ofstrong energy and infrastructure demand. The flat steel demand hasremained robust on back of strong auto sector demand, however, long steeldemand has remained subdued on back of lower construction demand dueto seasonality. We believe that flat steel demand would remain stable goingforward, while long segment is likely to perceive improvement in demandfrom higher construction and infrastructure demand.

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