Jefferies upgrades JSW Steel to 'hold' on cautiously optimistic outlook for 2024

Being the biggest consumer, China drives metal prices. "Jefferies China team expects fiscal policy to be more supportive, and investments to boost economic growth and avoid deflation in 2024," the firm said.

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With macros turning positive in the West and signs of China stability, foreign broking firm Jefferies expects a healthy 6-15 percent volume CAGR over FY24-26 for Coal India, Tata Steel and JSW Steel.

While it already had 'buy' ratings on Coal India and Tata Steel, it upgraded JSW Steel from 'underperform' to 'hold' on January 2.

Being the biggest consumer, China drives metal prices. "Jefferies China team expects fiscal policy to be more supportive, and investments to boost economic growth and avoid deflation in 2024," the firm said.

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As prices rise and India volume growth remains strong, Jefferies sees good upside for metal stocks, which have remained subdued over the past year. Its target for Coal India is Rs 450, for Tata Steel it is Rs 160 and JSW Steel is Rs 800. It believes JSW Steel's valuation is expensive and hence has a lower target than the consensus.

"Steel imports rose over October-November but should ease as the premium of Indian steel price to landed import has contracted from 11-14 percent to just 4 percent at spot," said Jefferies. It sees India steel price at Rs 58,000-58,500.

At 10:45am, Tata Steel was quoting Rs 138.20 on the NSE, lower by 1.18 percent. JSW Steel was quoting at Rs 866, down 1.28 percent.

"Indian metal and mining firms offer a bright spot in the world largely devoid of volume growth in commodities. Start of new capacities should drive strong 12-15 percent India volume CAGR for JSW Steel and Tata Steel over FY24-26," the firm said.

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