Top Stock Picks: 4 Metal Stocks To Buy As Suggested By ICICI Securities

Global metal prices have picked up steam as a result of the Russia-Ukraine crisis. Because of the present geopolitical situation and escalating input costs, domestic brokerage company ICICI Securities is bullish on the metal sector and has given Hindalco, Tata Steel, JSW Steel, and Steel Authority of India Limited (SAIL) a buy recommendation.

As per ICICI Securities "The Russia Ukraine conflict has provided traction to global metal prices. During YTD CY22, a healthy rally has been witnessed in both ferrous and non-ferrous metals. During YTD CY22 (January 1-March 10, 2022), aluminium prices on the LME increased by ~21% to US$3409/tonne. On the ferrous front, during the above mentioned period, Chinese HRC export price increased by 13% YTDCY22 to US$855/tonne, domestic HRC price have increased by 9% YTDCY22 to Rs 69500/tonne and domestic CRC prices increased 16% YTDCY22 to Rs 80500/tonne. Going forward, we believe supply fears on the back of current geopolitical scenario coupled with rising input costs is likely to support a further uptick in metal prices."

"Metal companies would benefit from an increase in prices amid geopolitical conflict. We maintain our BUY rating on Hindalco, Tata Steel and SAIL and upgrade our rating on JSW steel rating from HOLD to BUY. Hence, we have a BUY rating on Hindalco, Tata Steel, JSW Steel and SAIL. We value Hindalco on an SoTP basis and arrive at a target price of Rs 725. On the ferrous front, we value Tata Steel on an SoTP basis and arrive at a target price of Rs 1600. We also value JSW Steel on n SoTP basis and arrive at a target price of Rs 775. We value SAIL at 5x FY23E EV/EBITDA and arrive at a target price of Rs 120," said the brokerage.

Buy Hindalco for a target price of Rs 725

The brokerage claims "Hindalco's Indian aluminium business is likely to be a key beneficiary of the uptick in aluminium prices. Going forward, Novelis is also likely to continue to report a healthy performance. With respect to Novelis, we model EBITDA/tonne of US$525/tonne for FY23E. Hindalco is also focused on downstream capacity expansion at both Novelis and India, which augurs well."

Buy TATA Steel for a target price of Rs 1600

ICICI Securities has noted "With resepct to Tata Steel, for the standalone operations, we model EBITDA/tonne of Rs 21000/tonne for FY23E. Similarly, for Tata Steel European operations, we model EBITDA/tonne of US$100/tonne for FY23E. Going forward, over a longer term horizon, India's share in Tata Steel's overall consolidated production capacity is expected to increase to 73% in 2030 from 57% in 2020 (29% in 2010). Increasing share of higher margin domestic business, augurs well for the consolidated entity."

Buy JSW Steel for a price target of Rs 775

"With respect to JSW Steel, for the standalone operations, we model EBITDA/tonne of Rs 16000/tonne for FY23E. Going forward, JSW Steel has lined up significant capacity expanion plan. JSW Steel plans to increase its Indian steel capacity from ~26 million tonnes (MT) currently to ~35.5 MT by FY25E," the brokerage says.

Buy SAIL for a target price of Rs 120

The brokerage has highlighted that "Over the last couple of years, SAIL has reduced its debt notably, which augurs well. Going forward, for SAIL, we model EBITDA/tonne of Rs 7800/tonne for FY23E while our sales volume assumption of SAIL for FY23E is at 17.5 MT."

Company	Current Market Price (CMP)	Target	Upside in %	Rating
Hindalco	591	725	23	Buy
Tata Steel	1305	1600	23	Buy
JSW Steel	665	775	17	Buy
SAIL	100	120	20	Buy
Source: ICICI Direct Research. Data as of March 11, 2022