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Indian domestic steel demand has softened in recent months, led by funding constraints in government-led infrastructure projects around general election, according to CLSA Research. An uptick is likely to happen only by December quarter, it added.
Indian hot-rolled coil steel prices have corrected about 4 per cent since January, but are still at ~6 per cent premium to landed free trade agreement imports; could fall further unless global prices improve, CLSA noted. The valuations for Indian steel companies are at steep premium to global peers despite much higher leverage.
Enterprise value/EBITDA multiples of global steel companies have come down to ~4x from 5-6x historically. Rising iron ore prices are seen as beneficial for Tata Steel's backward-integrated India business but have not manifested in higher steel prices.
Margins at the European steel industry have declined sharply, given Tata's JV with Thyssenkrupp is not going through. CLSA reiterates “sell” on Tata Steel, JSW Steel
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