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Informist, Saturday, Mar. 1, 2025

 

By Narayana Krishna

 

HYDERABAD – Despite pricing pressure from rising imports of steel from China, India's metals and mining companies that are a part of the Nifty 200 delivered higher-than-expected earnings for the December quarter. Out of these eight companies, four reported an increase in net profit while four reported a decline. Six reported growth in net sales while two reported a decline. Improved realisations and sustained demand in non-ferrous segments such as aluminium drove the performance of these companies.

 

These eight metal companies reported a 5% year-on-year growth in net profit, far above the consensus estimate of a 6.8?ll in net profit. These companies, which include three Nifty 50, two Nifty 100, and three Nifty 100 constituents, reported a 4.5% on year growth in revenue against the consensus estimate the sector would post a revenue growth of 3.7%.

 

While the December quarter performance of these companies beat the consensus estimate, the performance of individual companies and sub-sectors varied due to pricing, demand slowdown, and imports from China.

 

Out of the eight companies under review, NMDC Ltd., Hindalco Industries Ltd. and Vedanta Ltd., posted strong earnings growth for Oct-Dec.

 

ALUMINIUM SHINES

Higher domestic demand and pricing helped aluminium companies post a better-than-expected growth for the quarter individually. However, on aggregate basis, two aluminium companies--Hindalco Industries and Vedanta--together reported a 58.22% on-year fall in net sales and a 46.04?ll in net profit. Besides aluminium, both the companies have exposure to other metals like copper and iron ore. Hindalco's December quarter consolidated net profit jumped 60% against analysts' estimates of a 51% year-on-year growth, boosted by domestic demand and higher price realisation.

 

While its US subsidiary Novelis posted weak earnings due to higher scrap prices, its India operations helped the company report decent numbers. The consolidated revenue of Aditya Birla group's flagship metals company was up by nearly 11% on year against the Street's view of 12.4% on year.

 

Vedanta saw robust growth aided by better pricing in the zinc and aluminium business. The company's consolidated revenue from operations increased 10% on year, but missed analysts' estimates. It was, however, the highest revenue growth in nine quarters. Vedanta's consolidated net profit rose 76% on year and beat the Street estimate. Same is the case with Hindustan Zinc Ltd., which reported 17% on year rise in sales and nearly 30% growth in net profit for the quarter.

 

"Expect a recovery in Novelis' performance in Jan-Mar, led by higher volume, better product mix, benefit of new contract pricing and favourable metal benefit. For India operations, healthy demand, gradual completion of ongoing growth projects and cost-saving initiatives will be key catalysts (for Hindalco)," Elara Securities said in a post-earnings research report. After the earnings, Elara raised its rating on the stock to buy and raised the target price to INR 734.

 

RUSTY QUARTER FOR STEEL

Out of eight companies in the metals and mining sector, the four steel companies reported an aggregate on-year fall of 43.75% in net profit for the December quarter while net sales fell by 82.60%. Steel makers such as Tata Steel Ltd. and JSW Steel Ltd. faced pressure from lower prices and rising imports, which led to weaker margins. Steel Authority of India Ltd. also posted a fall in profit due to subdued demand. However, strong domestic consumption offered some resilience to the sector.

 

For Tata Steel, the December quarter performance was a mix of ups and downs. While the company beat the Street view on revenue, it was down 3% from a year ago against the estimate of a 2.1?ll. This was the 10th consecutive quarter in which the company reported a year-on-year decline in revenue. The fall in revenues was despite an 8% growth in consolidated sales volumes. Tata Steel's net profit fell 36.4% on year, lower than the 48?ll expected by analysts.

 

JSW Steel reported a weak performance in Oct-Dec, its fourth straight weak quarter. While the fall in steel prices was the reason behind the weak numbers, the company's numbers were above the estimate. The profit fell despite a 12% growth in its consolidated sales volumes. JSW Steel reported a 70% on year fall in its net profit against the estimate of 73?ll, while its revenue fell by 1.3% on year against the estimate of a 3?ll.

 

 

 

Steel Authority of India Ltd. continued to struggle with weak product prices and rising imports, and reported an over 62% year-on-year fall in net profit for the December quarter--its fifth consecutive decline. However, SAIL saw a revenue rebound after four quarters of decline, supported by higher sales volume. For the December quarter, SAIL reported a 62?ll in its net profit against the estimate of a 48% growth, while its revenue rose nearly 5% against the estimate of a 2% growth.

 

Sales volume climbed to 4.43 million tonnes from 3.81 million tonnes a year ago, while crude steel production dipped slightly to 4.63 million tonnes.

 

Lower steel prices weighed on the top line in absolute numbers and on profitability in Oct-Dec, but operating leverage, disciplined cost control, and robust domestic demand helped partially mitigate this impact, thereby preventing a large margin decline, Systematix Institutional Equities said in a report last week.

 

In the steel sector, JSW Steel, Tata Steel, and SAIL reported a combined sales volume of 18.78 million tonne during the quarter, registering an 11% year-on-year and a 6% sequential growth in volumes. However, earnings before interest, tax, depreciation and amortisation margins for these three steel majors contracted by 162 basis points on year and 95 bps sequentially due to weak pricing. Reflecting the trend, Jindal Steel & Power Ltd. too reported a 51?ll in net profit while net sales saw marginal growth of 0.4%.

 

Iron ore major NMDC reported a decent growth during the quarter, defying the trend in the steel sector on the back of volume growth and higher pricing, which boosted the public sector iron ore company's numbers. NMDC's net profit surged 30% on year compared with an estimate of 36% growth.

 

Higher iron ore prices and improved realisation along with volume growth helped the company. NMDC sold 11.9 million tonne of iron ore in the quarter.

 

Systematix said non-ferrous companies posted marginally higher volumes but benefited significantly from input cost efficiency and high commodity prices, leading to EBITDA margin expansion. Hindalco reported a 68% on year rise in aluminium upstream per tonne EBITDA, while the copper business segment's overall EBITDA rose 18%. Vedanta's December quarter overall EBITDA registered a 30% on year rise in EBITDA for the quarter against the estimate of 26%.

 

The following table shows the performance of the eight companies in the metals and mining sector vis-a-vis the consensus estimate for each company as well as against the consensus estimate for the metals and mining sector and the Nifty 200 index.

 

 

Company	PAT beat analysts' estimate	Adjusted PAT growth %	Adjusted PAT growth estimate %	PAT beat sector estimate	PAT beat Nifty 200 estimate		Revenue beat analysts' estimate	Revenue growth %	Revenue growth estimate %	Revenue beat sector estimate	Revenue beat Nifty 200 estimate
Metals & Mining		4.88	-6.8					4.5	3.74
Nifty 200		8.8	10					5.5	4
HINDALCO INDUSTRIES LIMITED	YES	61.99	51.48	YES	YES		NO	10.57	12.41	YES	YES
HINDUSTAN ZINC LIMITED	YES	29.88	21.84	YES	YES		YES	17.05	15.93	YES	YES
JINDAL STEEL AND POWER LIMITED	YES	-50.71	-52.77	NO	YES		YES	0.42	-1.65	NO	NO
JSW STEEL LIMITED	YES	-66.05	-72.71	NO	YES		YES	-1.34	-3.26	NO	NO
NMDC LIMITED	NO	11.40	16.56	NO	NO		YES	20.72	19.87	YES	YES
STEEL AUTHORITY OF INDIA LIMITED	NO	-61.85	-32.89	NO	YES		YES	4.90	2.00	YES	YES
TATA STEEL LIMITED	YES	-46.57	48.00	NO	NO		YES	-3.01	-4.84	NO	NO
VEDANTA LIMITED	YES	76.20	58.04	NO	YES		NO	10.06	10.35	YES	YES

 

The following table shows the profit margins of the eight metals and mining sector companies that are a part of the Nifty 200.

 

 

	PAT Margin for Dec-24	PAT Margin for Dec-23	PAT Margin for Sept-24
Nifty 200	11.87%	11.51%	11.37%
Metals & Mining Sector	5.84%	5.82%	5.81%
Company	PAT Margin for Dec-24	PAT Margin for Dec-23	PAT Margin for Sept-24
HINDALCO INDUSTRIES LIMITED	6.47%	4.41%	7.60%
HINDUSTAN ZINC LIMITED	30.94%	27.88%	28.89%
JINDAL STEEL AND POWER LIMITED	8.09%	16.48%	7.68%
JSW STEEL LIMITED	1.98%	5.76%	1.97%
NMDC LIMITED	29.76%	32.25%	26.40%
STEEL AUTHORITY OF INDIA LIMITED	0.40%	1.09%	3.38%
TATA STEEL LIMITED	0.84%	1.53%	1.51%
VEDANTA LIMITED	9.07%	5.66%	6.60%

 

End

 

US$1 = INR 87.49

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Akul Nishant Akhoury

 

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