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Last Updated : Jun 25, 2019 09:45 AM IST | Source: Moneycontrol.com

Tata Steel, JSW Steel fall 2% as CLSA turns bearish on earnings risk

The brokerage said rising ore prices should weaken cost support hopes for steel

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Tata Steel and JSW Steel fell more than 2 percent intraday on June 25 after global brokerage house CLSA turned bearish on the sector, citing earnings risk and steep valuations.

The brokerage has sell call on Tata Steel with a target price at Rs 395 per share and on JSW Steel with a price target at Rs 225, implying 19 percent and 13 percent potential downside from current levels, respectively.

"Both are trading at steep EV/EBITDA and price-to-book value premium to global peers," it said.

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JSW Steel was quoting at Rs 255.45, down Rs 2.40, or 0.93 percent after hitting a 52-week low of Rs 252.30 and Tata Steel was down 1.87 percent at Rs 477.05 on the BSE at 0918 hours IST.

"Steel prices are under pressure and there is a risk to earnings and steep valuations," said CLSA that expects ore prices to peak in Q3CY19 and ease materially over Q4CY19 & Q1CY20.

The brokerage said rising ore prices should weaken cost support hopes for steel. "We see downside risk to our below-consensus estimates," it added.

Disclaimer: The views and investment tips expressed by brokerages on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Jun 25, 2019 09:45 am
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