Metal stocks are likely to deliver a mixed performance in the September quarter, with Coal India and Tata Steel emerging as Nuvama Institutional Equities’ preferred names, while Jindal Steel is expected to be the key underperformer.
In its Q2 FY27 preview, Nuvama expects most steel companies under its coverage to report a 10–13% sequential increase in EBITDA, supported by a recovery in volumes after maintenance shutdowns during Q1. However, lower realisations and higher costs are expected to weigh on profitability on a per-tonne basis.
The brokerage expects steel volumes to recover by 6–25% QoQ, helped by capacity ramp-ups. At the same time, average flat steel prices remained relatively firm, while long steel prices declined by around ₹3,500 per tonne sequentially. This is likely to result in lower blended realisations across most companies.
Higher coking coal costs are another margin headwind. Nuvama expects coking coal prices to rise by around $10–15 per tonne QoQ, although this could be partly offset by a decline of around ₹100 per tonne in iron ore costs.
As a result, EBITDA per tonne is expected to decline by around ₹600–2,200 per tonne across the steel companies under coverage.
Coal India, Tata Steel emerge as outperformers
Coal India is Nuvama’s top pick in the mining segment, with the brokerage expecting EBITDA excluding OBR to rise 22% year-on-year in Q2 FY27. The improvement is expected to be driven by higher volumes and stronger e-auction prices.
The brokerage expects Tata Steel to also outperform its peers. Its relatively higher exposure to flat steel is likely to limit the impact of the decline in long steel prices, with blended realisation expected to fall by only around ₹500–600 per tonne QoQ. Tata Steel’s EBITDA per tonne is estimated to decline by around ₹610 per tonne, the lowest decline among the steel companies covered by Nuvama.
The brokerage also expects Tata Steel Europe to turn EBITDA-positive, at around $7 per tonne in Q2 from a loss of $17 per tonne in Q1, helped by higher prices and lower costs in the Netherlands. This improvement is likely to be partly offset by higher losses in the UK.
Why Jindal Steel could underperform
Jindal Steel is the key underperformer in Nuvama’s Q2 preview, with the brokerage expecting its EBITDA to decline around 13% QoQ.
The company is expected to face a sharper decline in realisations, with prices estimated to fall by around ₹3,000 per tonne QoQ, largely due to an adverse product mix. At the same time, higher coking coal costs are expected to increase its production costs.
Consequently, Jindal Steel’s EBITDA per tonne could decline by around ₹2,164 per tonne, the steepest fall among the steel companies covered by Nuvama.
The brokerage expects Jindal Stainless, in contrast, to report around 10% QoQ growth in EBITDA, supported by higher volumes.
Non-ferrous metals: Mixed Q2 outlook
The outlook for non-ferrous companies remains mixed. Nuvama expects Hindalco’s India EBITDA, including Utkal Alumina, to decline around 8% QoQ, while Vedanta Aluminium is expected to see a 4% decline, primarily due to lower aluminium prices.
Novelis’ adjusted EBITDA is expected to remain broadly flat sequentially at around $500 million.
On the other hand, Hindustan Zinc’s EBITDA is expected to rise 5% QoQ, while Vedanta’s EBITDA could increase by around 7%, primarily supported by higher zinc prices.
Coal India, NMDC: Diverging mining outlook
Within mining, Nuvama expects Coal India’s EBITDA, excluding OBR, to increase by 22% YoY, benefiting from higher production volumes and improved e-auction prices.
For NMDC, the brokerage expects EBITDA to remain broadly flat year-on-year. While iron ore realisation per tonne is estimated to increase by ₹418 to ₹5,391, the benefit is likely to be offset by lower volumes and higher royalty costs. EBITDA per tonne is estimated at ₹1,943, up 4% YoY.
Nuvama’s Q2 metal picks
Based on its Q2 FY27 estimates, Nuvama identifies Coal India and Tata Steel as outperformers, backed by stronger volume growth, e-auction realisations and relatively better margin resilience.
Jindal Steel is the underperformer, primarily due to a sharper decline in realisations, an adverse product mix, and higher coking coal costs, which are likely to result in the steepest decline in EBITDA per tonne among its steel coverage.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
