Edelweiss Securities said that Q3FY10 will be modest

Q3 will be modest; realisation were under pressure; expect base metal prices to be flat for the next 3 months: Edelweiss Securities

Prasad Baji, Senior Analyst Metals at Edelweiss Securities (BOM:532922) said that Q3FY10 will be modest, realizations were under pressure. Steel makers have taken price hikes and volumes are expected to be strong in March quarter. His 6 month outlook is very strong on steel sector. He expect base metal prices to be flat for the next three month.

He said that most non ferrous companies are well integrated on aluminum and Zinc front, with the exception of copper. He is positive on Tata Steel. He would wait for declines while entering JSW Steel, he added.

POSCO is the 4th largest steelmaker in the world. Its Q4 revenues stood down 12% and PAT stood up 77%. The company is targetting 17% output rise in 2010. Demand is recovering, and iron ore and coking coal is cheaper. The company is expected to post firm earnings growth.

Earnings of big 3 companies for Q3FY10 stood up between 12-35%. Metal company’s numbers are largely backward looking. It is unlikely to see significant QoQ earnings expansion.

Research firm Credit Suisse expects that JSW Steel’s volumes will decline 4% (QoQ). It expect EBITDA/t to expand to $ 180/t. It said that $ 6 million EBITDA loss from US mill is likely. JPMorgan is of the view that EBITDA/mt of JSW Steel is of $ 161/mt. Realisation decline at Rs 900/mt (standalone business) and steel sales volumes of 1.42 mt are likely.

Credit Suisse is of the view SAIL’s Q3 volumes fell 4.5%. EBITDA/t will decline 13% QoQ to $ 142/t. On SAIL, JPMorgan is of the view that employee expenses of the company stood at Rs 1,300 crore. Volume growth was of 23%, realisations declined 4%. It feels that Q4FY09 is likely to be stronger. About Tata Steel, Credit Suisse is of the view that the company had strong December and the EBITDA grew by $ 30/t (QoQ).

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