Prefer Hind Zinc followed by Tata Steel, CIL: Angel Broking

Despite disappointing earnings, Angel Broking is bullish on Tata Steel at these levels. "The stock is available at reasonably cheap valuations. We have a buy rating on this stock. We will lower our target price a little bit from Rs 499 that was there earlier," he elaborated.

Given Coal India’s better than expected Q1 earnings, the broking firm is likely to upgrade the stock from neutral to accumulate.

Chauhan expects Hindalco to see 20% decline in net profit due to lower profitability from aluminum business. "Given the current levels of aluminum price, we don’t believe that Mahan project will be profitable. We have a contra call on Hindalco and we are neutral at these levels."

Meanwhile, he would prefer Hindustan Zinc followed by Tata Steel and Coal India from this space.

Below is the edited transcript of Chauhan’s interview with CNBC-TV18.

Q: Tata Steel hasn’t moved much despite a poor set of numbers. What did you make in terms of a review of the Tata Steel numbers and what is your call on the stock?

A: The results were disappointing because of weak performance from its European operations. For the last three four quarters we have seen that European operations have disappointed and that is now priced into the market. Going forward, we are bullish at these levels. The stock is available at reasonably cheap valuations.

Going forward, the Brownfield expansion from Jamshedpur should come in from next quarter onwards. Apart from that there will be higher volumes in FY14 from those profitable operations. We have a buy rating on this stock. We will lower our target price a little bit from Rs 499 that was there earlier.

Q: What are you expecting from Hindalco by way of a profit? We were getting a polled number of about Rs 500-520 crore. Does that square with what you are expecting, that would be down 20%?

A: We are also expecting 20% decline in net profit at Rs 508 crore for Hindalco because of lower profitability from aluminum business. In that space there is a pressure not only because of declining realizations, but also higher input costs.

Q: At this level does that reflect the cut in profit? How are you looking at the full year and therefore the stock?

A: For the full year the stock will be driven more or less by its upcoming projects. It is in the verge of massive expansion plans, but having said that we have seen delays over the last one and a half years.

We continue to expect delays in the Mahan project since coal not coming in atleast for 18 months from now. Given the current levels of aluminum price, we don’t believe that Mahan project will be profitable. We have a contra call on Hindalco and we are neutral at these levels.