Metals & Mining

Apr-Jun'20 Earnings Preview

July 9, 2020 Earnings marred by weak domestic volumes and
higher share of exports

Top Picks
Hindalco Industries (HNDL)
Jindal Steel & Power (JSP)
Marred by slump in domestic demand due to covid-19 and higher share of exports
(having low margins), we expect EBITDA of our coverage universe to fall 55%
QoQ/60% YoY. Steel realisations are expected to fall Rs3500/t QoQ due to higher
share of exports at 60% v/s 15% QoQ/YoY. While, strong push in exports helped
contain the fall in overall volumes to 25% QoQ/23% YoY at 9.6mnt. Hit by lower
realisations and volumes, EBITDA/t would likely to fall by 38% QoQ/47% YoY at
Rs4,970. However, we expect JSP to post strong set of earnings than its peers, led
by iron ore inventory benefit and better volumes.

Maintain Underweight on sector; Reiterate BUY on JSP and HNDL: Stocks

moved up ~30-35% over last couple of months in light of improvement in global
prices (up 15% from bottom), low input prices and gradual recovery in domestic
demand. However, we expect prices to weaken in H2CY20 due to ease in China’s
pent-up demand and sharp increase in Chinese steel production. We continue to
maintain Underweight outlook given weak earnings outlook and over leveraged
B/S. While, we maintain BUY on Hindalco (HNDL) in Non-ferrous space on the
back of attractive valuations, revival of auto demand in North America/Asia and
comfortable B/S. In Ferrous space, we like JSP given the better profitability in both
steel and power biz, attractive valuations, lean capex and comfortable debt gearing.

Fall in global steel production limited by rise in Chinese production: World

crude steel production fell sharply by 11% YoY at 286mnt in Apr-May’20 largely due
to lockdowns across the countries except China. China’s steel production grew 2%
YoY at 177mn t with expedited relaxation in lockdowns. Although, RoW’s production
fell 26% to 109mnt due to long lockdowns. India’s steel production fell 52% YoY at
9mnt. As worst hit by pandemic, EU/USAs production fell 25%/35% YoY at
21mnt/10mnt. South Korea performed better other nations (except China) with 11%
fall at 11mn t on the back of better planning on virus containment and better
domestic demand.

Movement in World crude Steel Production

China World steel World steel ex China

14.0
10.0
6.0
2.0
-2.0
(%)

-6.0
-10.0
-14.0
-18.0
-22.0
-26.0
Kamlesh Bagmar -30.0
May-17

May-18

May-19

May-20
Feb-18

Feb-20
Feb-19
Aug-17

Aug-18

Aug-19
Nov-17

Nov-18

Nov-19

kamleshbagmar@plindia.com | 91-22-66322237
Amit Khimesra
amitkhimesra@plindia.com | 91-22-66322244

Source: World Steel, PL

July 9, 2020 1
 Metals & Mining

Average Chinese steel prices China HRC Price

(including 17% VAT) fell 3% QoQ or
US$15/t to US$501/t 580

560

(US$ / tonne)
540

520

500

480

460

May-20
Jun-19

Jun-20
Jan-20

Mar-20
Feb-20
Oct-19

Apr-20
Jul-19

Dec-19
Nov-19
Sep-19
Aug-19
Source: Bloomberg, PL

Average HRC prices in North North America HRC Price

America fell 17% QoQ or 850
US$125/short t to US$596 due to
weak demand and high inventory 800
(US$ / short tonne)

750

700

650

600

550

500

May-20
Jun-19

Jun-20
Jan-20

Mar-20
Feb-20
Oct-19

Apr-20
Jul-19

Nov-19

Dec-19
Sep-19
Aug-19

Source: Bloomberg, PL

Average HRC price in Europe fell 6% Europe HRC Price

QoQ or US$32/t to US$482/t due to
570
weak demand and increased imports.
550
(US$ / tonne)

530

510

490

470

450
Jun-19

Jan-20

May-20

Jun-20
Mar-20
Feb-20
Jul-19

Apr-20
Oct-19

Nov-19

Dec-19
Aug-19

Sep-19

Source: Bloomberg, PL

July 9, 2020 2
 Metals & Mining

Average spot iron ore prices (CIF Indian origin Iron Ore (62% Fe) Export Prices (CIF) to China
China) rose 4% QoQ or US$4/t to
US$93/t due to reduced supplies from 135
Brazil owing to Covid-19 and heavy
rains. 125

(US$ / tonne)
115

105

95

85

75

May-20
Jun-19

Jan-20

Jun-20
Mar-20
Feb-20
Oct-19

Apr-20
Jul-19

Dec-19
Nov-19
Sep-19
Aug-19
Source: Bloomberg, PL

Average heavy steel scrap prices fell China Heavy Steel Scrap Prices
8% QoQ or US$30/t at US$346/t due
to production cuts by EAF based 410
producers and increased supply. 400
(US$ / tonne)

390
380
370
360
350
340
330
320
310
300

May-20
Jun-19

Jan-20

Jun-20
Mar-20
Feb-20
Oct-19

Apr-20
Jul-19

Dec-19
Nov-19
Sep-19
Aug-19

Source: Bloomberg, PL

Spreads in USA/Europe remained Region-wise spreads of Blast furnace producers

under pressure owing to slump in
demand and weak prices. While, US China Europe
spreads in China inched up due to 500
favorable steel prices.
400
(US$ / Tonne)

300

200

100

-100
Jun-17

Jun-18

Jun-19

Jun-20
Jun-16

Mar-18

Mar-19

Mar-20
Mar-17

Sep-17

Dec-17

Sep-18

Dec-18

Sep-19

Dec-19
Sep-16

Dec-16

Source: Bloomberg, PL

July 9, 2020 3
 Metals & Mining

Steel Volumes is expected to fall 25% QoQ in Q1FY21E on the back of lockdown and slump in demand
Steel Volume Growth QoQ (%) Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21E
Jindal Steel & Power -4.0 11.8 -4.5 19.7 -0.7 -2.0 12.8 -16.2 11.4
JSW Steel -9.2 3.4 -7.1 16.6 -12.6 -4.0 11.9 -8.2 -21.6
Steel Authority of India -12.5 6.2 -6.8 27.7 -21.4 -3.1 29.9 -9.3 -39.9
Tata Steel (Incl TATA Steel BSL) 26.1 13.1 -10.2 21.6 -18.0 4.5 16.0 -17.0 -26.2
Source: Company, PL

Q1FY21 Result Preview

Company YoY gr. QoQ gr.
Q1FY21E Q1FY20 Q4FY20 Remark
Name (%) (%)
Sales 191,598 249,390 -23.2 275,682 (30.5)
EBITDA 19,448 66,124 (70.6) 67,289 (71.1) Coal dispatches are expected to fall
Margin (%) 10.2 26.5 24.4 sharply by 26.4% QoQ to 120.6mn tonnes
on the back of lower demand from power
PBT 25,448 70,118 (63.7) 74,476 (65.8) plants and industries. Realisations are
Coal India
Adj. PAT 18,577 46,306 (59.9) 46,259 (59.8) expected fall by 5.6%/Rs90/t QoQ. Due to
lower volumes and higher costs,
Coal desp. (mn tn) 120.6 153.5 -21.4 163.9 (26.4) EBITDA/t is expected to contract by
Real. / tonne (Rs) 1,474 1,513 (2.5) 1,562 (5.6) 61%/Rs250 QoQ to Rs160.
EBITDA / tonne (Rs) 161 431 (62.6) 411 (60.7)
Sales 71,765 100,547 -28.6 99,920 (28.2)
EBITDA 6,490 7,174 (9.5) 11,410 (43.1)
Margin (%) 9.0 7.1 11.4 Al production is expected to fall 6.7%
PBT 140 565 (75.2) 5,060 (97.2) QoQ. Cu production is expected to fall
43% QoQ. Due to weak realisations, Al
Hindalco Adj. PAT 91 368 (75.2) 3,260 (97.2) EBITDA is expected to fall 13% QoQ to
Industries Alum. (Al) prod (t) 305,000 326,000 (6.4) 327,000 (6.7) Rs6.4bn. Due to weak realisations, Cu
EBITDA is expected to fall by 83% QoQ
Copper (Cu) prod (t) 43,000 76,000 (43.4) 75,000 (42.7) to Rs0.7bn. Hence, EBITDA is expected
EBITDA‐Al (Rs m) 6,379 4,644 37.4 7,350 (13.2) to fall 43% QoQ at Rs6.5bn.
EBITDA‐Cu (Rs m) 701 2,530 (72.3) 4,060 (82.7)
EBITDA-Utkal Alumina (Rs m) 1,708 3,836 (55.5) 3,040 (43.8)
Sales 39,543 49,870 -20.7 43,910 (9.9)
EBITDA 16,285 24,770 (34.3) 19,640 (17.1) Total refined zinc‐lead volumes are
expected to fall 8% QoQ to 204kt. Silver
Margin (%) 41.2 49.7 44.7 volumes are expected to grow 4% QoQ to
Hindustan
PBT 16,235 23,430 (30.7) 18,650 (13.0) 149.6t. Refined metal realisations are
Zinc
Adj. PAT 12,501 17,650 (29.2) 13,390 (6.6) expected to fall on the back of weak Zinc
and Lead realisations. Hence, EBITDA
Ttl. Refined metal‐tns 204,000 215,000 (5.1) 221,000 (7.7) would fall by 17% QoQ to Rs16.3bn
Silver Sales Vol. (kg) 149,600 155,000 (3.5) 144,000 3.9
Sales 78,755 99,456 -20.8 88,107 (10.6)
EBITDA 20,150 21,731 (7.3) 22,198 (9.2) Standalone volume is expected to grow
Margin (%) 25.6 21.8 25.2 by 11% QoQ to 1.6m tonnes. Realisations
PBT -540 113 (578.8) 1,865 (128.9) are expected to fall by Rs3,500/t QoQ.
Due to drop in realisations, Standalone
Jindal Steel & Adj. PAT -672 94 (812.4) 2,224 (130.2) EBITDA/t is expected to fall by 8%/Rs893
Power Steel Sales Vol. (Tonne) 1.6 1.5 3.3 1.4 11.4 QoQ to Rs10,266. Jindal power (JPL)
EBITDA/unit is expected to increase
Standalone EBITDA 16,015 16,080 (0.4) 15,622 2.5 marginally by 0.5% QoQ to Rs1.5.
Standalone EBITDA / t (Rs) 10,266 10,649 (3.6) 11,159 (8.0) Consolidated EBITDA is expected to fall
JPL‐Kwh sold (m) 2,006 2,743 (26.9) 2,236 (10.3) 9% QoQ to Rs20.2bn.
JPL‐Rate Rs/ Kwh 4.1 4.1 (0.1) 4.1 (0.7)
Sales 125,754 198,120 -36.5 178,870 (29.7)
EBITDA 14,235 37,160 (61.7) 29,750 (52.2) Volume is expected to fall by 22% QoQ at
Margin (%) 11.3 18.8 16.6 2.9m tonnes. Realisations are expected
to drop by 9%/Rs3,800/t QoQ at
PBT -5,515 17,890 (130.8) 9,530 (157.9) Rs37,500/t. Due to weak realisations,
JSW Steel
Adj. PAT -5,233 10,280 (150.9) 7,945 (165.9) EBITDA/t is expected to contract by
34%/Rs3,000 QoQ to Rs5,715. Hence,
Sales Vol. (mt) 2.9 3.8 -22.7 3.7 (21.6) Consolidated EBITDA is expected to fall
Real. / tonne (Rs) 37,495 46,664 (19.6) 41,289 (9.2) by 52% QoQ to Rs14.2bn.
EBITDA / tonne (Rs) 5,716 9,936 (42.5) 8,703 (34.3)

July 9, 2020 4
 Metals & Mining

Company YoY gr. QoQ gr.

Q1FY21E Q1FY20 Q4FY20 Remark
Name (%) (%)
Sales 19,240 32,637 -41.0 31,873 (39.6)
EBITDA 7,896 18,668 (57.7) 14,919 (47.1)
Iron ore volumes is expected to fall by
Margin (%) 41.0 57.2 46.8 26% QoQ to 6.4m tonnes. Realisations
PBT 8,446 19,132 (55.9) 15,791 (46.5) are expected to fall by 19% QoQ to
NMDC Rs2,975/t. Due to weak realisations,
Adj. PAT 6,250 11,794 (47.0) 11,959 (47.7) EBITDA/t is expected to contract by 29%
Total Volume (mt) 6.4 8.7 -26.0 8.6 (25.6) QoQ to Rs1,230. Hence, EBITDA is
expected fall by 47% QoQ to Rs7.9bn.
Realization/t (Rs.) 2,974 3,705 (19.7) 3,674 (19.1)
EBITDA/t (Rs) 1,231 2,153 (42.8) 1,731 (28.9)
Sales 91,430 148,200 -38.3 158,565 (42.3)
EBITDA -6,228 15,819 (139.4) 10,054 (161.9) Volumes are expected to fall by 40% QoQ
Margin (%) -6.8 10.7 6.3 to 2.2m tonnes. Realisations are
expected to fall by 4.5%/Rs1,910/t QoQ to
Steel PBT -22,028 1,039 (2,219.5) -5,746 283.4 Rs40,400/t. Due to weak realisations,
Authority of
India Adj. PAT -22,028 688 (3,299.9) -5,746 283.4 expected to report negative EBITDA/t of
Rs2,795 v/s positive EBITDA/t Rs4,870 in
Sales Vol. (m tonnes) 2.2 3.2 (31.4) 3.7 (39.9) Q1FY20. Hence, would report EBITDA
Real. / Tonne (Rs) 40,400 45,076 (10.4) 42,310 (4.5) loss of Rs6.2bn v/s Rs15.8bn in Q1FY20.
EBITDA / Tonne (Rs) -2,793 4,869 (157.4) 2,710 (203.1)
Sales 99,153 160,913 -38.4 142,114 (30.2)
EBITDA 18,319 39,569 (53.7) 36,487 (49.8)
Standalone volume is expected to fall by
Margin (%) 18.5 24.6 25.7 25% QoQ to 2.2m tonnes. Realisations
Tata Steel - PBT -17,715 17,508 (201.2) 18,136 (197.7) are expected to fall by 6.7% or Rs3,280/t
QoQ to Rs45,560/t. Due to weak
India Adj. PAT 1,281 15,651 (91.8) 10,502 (87.8) realisations, domestic EBITDA/t is
Sales Vol. (m tonnes) 2.2 3.0 -27.7 2.9 (25.2) expected to fall by 33%/Rs4,120 QoQ to
Rs8,415.
Realization/t (Rs.) 45,558 53,492 (14.8) 48,837 (6.7)
EBITDA / Tonne (Rs) 8,417 13,154 (36.0) 12,538 (32.9)
Sales 248,549 359,471 (30.9) 337,700 (26.4)
Tata Steel Europe (TSE) is expected to
EBITDA 20,785 53,769 (61.3) 46,469 (55.3) report negative EBITDA/t of US$23 at v/s
Margin (%) 8.4 15.0 13.8 positive EBITDA/t of US$4 in Q4FY20
Tata Steel - due to weak spreads and lower volumes.
PBT (17,715) 17,508 (201.2) 18,136 (197.7)
Consol Owing to weak performance in domestic
Adj. PAT (17,324) 7,066 (345.2) 23,102 (175.0) ops and losses at TSE, we expect
SalesVol.‐Corus (mt) 1.9 2.3 (14.2) 2.4 (18.1) consolidated EBITDA to fall by 55% QoQ
to Rs20.8bn.
EBITDA/Tn‐Corus (US$) (23) 4 (678.7) 4 (707.4)
Source: Company, PL

July 9, 2020 5
 Metals & Mining

Q4FY20 Result Review

Sector reported earnings in line with our estimates. Revenue/EBITDA/PAT

grew 2%/24%/86% QoQ at Rs1,056bn/Rs215bn/Rs109bn against our estimate
of Rs1,062bn/Rs210bn/Rs91bn. In the pack, TATA Steel (TATA), Jindal Steel
& Power (JSPL) were above our estimates while Hindalco Industries (HNDL),
Coal India (COAL), Hindustan Zinc (HZ) posted earnings in line with our
estimates. NMDC and JSW Steel (JSTL) continued to disappoint due to lower
realisations and higher costs respectively.

 Tata steel (TATA) posted earnings above our estimates led by higher than
expected earnings in TATA Steel Europe (TSE). While, Indian operations
reported earnings in line with our expectation. Standalone EBITDA rose 10%
QoQ (↓26% YoY) at Rs36.5bn (PLe:Rs37.4bn). TSE posted EBITDA of
US$9mn (PLe: loss of 63mn) against loss of US$134mn/profit of +US$170mn
in Q3FY20/Q4FY19 due to lower RM cost.

 JSW Steel (JSTL) earnings were below our estimates due to lower than
expected earnings in domestic subsidiaries and higher inter-company
eliminations. Domestic unitary EBITDA came in line with our estimates at
Rs8,700 (PLe:Rs8,500), up 45% QoQ/↓14% YoY.

 JSP reported results ahead of our estimates led by higher margins in India and
Shadeed steel operations. EBITDA of Domestic steel/Shadeed/Jindal power
(JPL) rose 16%/93%/30% QoQ (+8%/+82%/25% YoY). EBITDA/t beat our
expectation by 15% at Rs12,100 (PLe:Rs10,510, up 44% QoQ/22% YoY) due
to higher than expected realisations. Due to lower costs and flat realisations,
JPL’s EBITDA rose 30% QoQ/+25% YoY at Rs3.3bn (PLe:Rs3.2bn).

 In non-ferrous space, Hindalco (HNDL) reported earnings in line with our

estimates. Overall EBITDA of Indian operations (including Utkal Alumina) met
our estimates at Rs13.6bn (PLe:Rs13.2bn), up 4% QoQ (↓3% YoY). Its
subsidiary - Novelis maintained EBITDA margins at USD435/t despite weak
scale and poor product mix. The company requested US authorities for
extension of timelines to divest Aleris’ Auto finishing unit at Lewisport due to
weak market conditions 4) Lewisport facility has the potential to generate
EBITDA of USD120mn on fully ramped-up operations

 Hindustan Zinc’s (HZ) earnings were in line with our estimates. EBITDA came
in at Rs19.6bn (PLe:Rs18.9bn), down 14% QoQ (down 20% YoY)

July 9, 2020 6
 Metals & Mining

Steel EBITDA/t of coverage universe rose 34% QoQ

13,000
12,000
11,000
10,000
9,000

Rs/t
8,000
7,000
6,000
5,000
4,000

Q4FY17

Q2FY18

Q4FY18

Q1FY19

Q2FY19

Q3FY19

Q1FY20

Q3FY20
Q1FY18

Q3FY18

Q4FY19

Q2FY20

Q4FY20
Source: Company, PL (Excluding SAIL, which is yet to report Q4FY20 result)

Q4FY20 EBITDA in line with our estimates (Excl SAIL)

Sales EBITDA PBT Adj. PAT
(Rs mn)
Q4FY20 YoY gr. QoQ gr. Q4FY20 YoY gr. QoQ gr. Q4FY20 YoY gr. QoQ gr. Q4FY20 YoY gr. QoQ gr.
COAL IN 2,75,682 -3.4% 18.9% 67,289 -18.1% 35.4% 74,476 -16.3% 39.6% 46,259 -23.2% 18.0%
HNDL IN 99,920 -19.2% -2.3% 11,410 26.4% 12.6% 5,060 30.1% 59.1% 3,260 38.2% 63.1%
HZ IN 43,910 -20.0% -6.0% 19,640 -29.6% -14.2% 18,650 -31.5% -11.0% 13,390 -33.4% -17.3%
JSP IN 88,107 -13.3% -5.3% 22,198 20.3% 22.0% 1,865 -146.0% -192.9% 2,224 -74.6% -199.2%
JSTL IN 1,78,870 -20.0% 0.5% 29,750 -33.0% 35.2% 9,530 -59.7% 347.4% 7,945 -47.8% 2106.9%
NMDC IN 31,873 -12.5% 6.0% 14,919 -22.6% -6.3% 15,791 -22.3% -4.1% 11,959 -11.1% -13.1%
TATA IN 3,37,700 -20.4% -4.9% 46,469 -38.2% 47.7% 18,136 -56.7% -355.3% 23,102 -4.7% -296.7%
Source: Company, PL (SAIL is yet to announce Q4FY20 Result)

Management Commentary
Company Commentary

1) Hopeful to maintain FY20 sales volumes in FY21e 2) Utilisation rates of Indian plants improved to 80% from 50%
in Apr'20. While, TSE ops operating at 70% utilisations 3) Guided share of exports at ~50%/30% in
Q1FY20e/Q2FY20e 4) Company expects improvement of Rs1,000-1500/t QoQ in Q2 realisations due to increase in
TATA share of domestic volumes 5) Capex for FY21e curtailed sharply by 50% to Rs50bn; would revisit capex in H2FY20e
6) In discussions with UK Government for long term support 7) Targeting savings of €600mn in TSE from ongoing
transformation program 8) Profitability of Sukinda chromite mines would hit by 50% to Rs4-4.5bn in next two years
due to high premium bid in auction 9) Expects merger of TATA Steel BSL (Erstwhile Bhushan Steel) in FY21e.

1) Currently operating at 85% utilisation 2) Won four iron ore mines in Odisha under auction with approved capacity
of 29mnt 3) Will start production at two of the above mines by July’20 4) Will source 16mnt/7mnt iron ore from captive
mines in Odisha/Karnataka, equivalent to 72% of requirement 5) Calibrated capex with postponement of spending in
downstream facilities 6) Curtailed capex guidance for FY21e by 45% to Rs90bn (FY20:Rs102bn), includes capex of
Rs8bn on mines won in Odisha and Karnataka 7) Will spend Rs164bn over FY22e and FY23e 8) Rs75bn of debt
JSTL
scheduled for repayment in FY21e 9) Impending acquisition of BPSL would get delayed due to Covid-19 pandemic
10) Sees Net Debt/EBITDA peaked-out at current levels 11) Inventory increased by 100kt QoQ/225kt YoY in Q4 at
1.16mnt but started declining in May’20 12) Coking coal cost will be flat QoQ in Q1FY21e at US$141-142/t 13) Benefit
of USD25-30/t fall in coking coal prices would be visible Q2FY20e onwards 14) Targeting to reduce commercial
buying/fixed cost by 10-15% in FY21e

1) Standalone/Consolidated debt due for repayment stands at Rs16.3bn/Rs61bn in FY21e 2) will raise US$500-
700mn through bonds to repay the overseas debt 3) Availed moratorium on principal + interest liability of Rs22bn 4)
Capex guidance for FY21e at Rs6-8bn 5) Exported 450kt in the quarter till yesterday with diversified market mix 6)
200kt production loss on account of 40 days planned shutdown of Angul Blast Furnace (BF) in Q4FY20; BF currently
JSP producing 10ktpd (~3.6mtpa) 7) Awaiting clarity from Govt about incentives on coal gasification plant (JSP operates
1.8mnt gas based DRI plant at Angul) 8) JPL’s 43% of capacity operating in Apr-May'20 9) Expect signing of 420MW
of PPA by end of July’20 followed by supply of power from October’20 10) Due to slump in coal demand, JPL managed
to book coal till Aug'20 at zero premium 11) Seeing domestic steel EBITDA margins for Q1FY21e at Rs9,000/t and
Rs9000+ for FY21e

July 9, 2020 7
 Metals & Mining

Company Commentary

1) Domestic Al demand declined 11%/6% YoY in Q4FY20/FY20 at 905kt/3720kt 2) Guided marginal drop of 1%/15kt
in AL sales volumes in FY21e at 1.19mnt 3) CU volumes would be flat YoY at 334kt 4) Realisations in AL exports
lower by Rs2,000-3,000/t over domestic volumes 5) Revival in domestic demand would help maintain AL
exports/domestic mix of 60:40 in FY21e 6) AL CoP to fall by 5% QoQ in Q1 due to fall in coal, caustic and carbon
prices 7) Coal sourcing mix for Q4FY20 stood at 60%/35%/2%/2% through Linkage/E-auction/Captive/Imports with
blended cost below Rs900/mn kcal 8) Hedged 36%/2% AL volumes at US$1,711/Rs1,70,640 and 35% of the currency
HNDL at Rs75.9 9) Reduced capex guidance for FY21e by 30% at Rs15bn 10) Expects Govt’s recent move to auction
composite auction of bauxite and coal mines, would take couple of years to kick off 11) Gradually increasing
production at Novelis’s auto sheet (1/5th of total volumes) plants in North America and Europe 12) Auto demand
remains strong in Asia 13) Beverage cans (2/3rd of volumes) remains strong across markets 14) Volumes of Specialty
(15% of volumes) segment is mixed bag as markets in North America and Europe were in lockdown and demand was
tepid in Asia and South America 15) Expect strong revival in Specialty product’s demand in North America and Europe
16) Demand growth in aerospace segment remains intact in medium term with strong order backlog

1) 25% of Global zinc supply impacted due to COVID-19. Expect global mined metal production to dip by 5% in CY20
due to manpower issues 2) Though not quantified, capex for FY21e will be lower than FY20 (earlier guided annual
capex of $250-300mn) 3) 34kt/5t of mined metal/silver production hit in Q4 due to lockdown 4) Ore grade improved
HZ by 72bps to 7.9% over H1FY20 end 5) Impacted by lockdown, domestic volume’s share contracted to 30% (v/s 74%
pre-COVID) in the past one month; expects to normalize by Jun'20 6) Fumer project at Chanderia to commence
production in May’20 7) Shaft at RA mine commissioned during the quarter, will enable mine to achieve produce
capacity of 5mnt (current 3.5mnt)

July 9, 2020 8
 Metals & Mining

Valuation Summary
CMP Sales (Rs bn) EBITDA (Rs bn) PAT (Rs bn) EPS (Rs) EV/EBITA (x) PE (x)
Company Names Rating TP (Rs)
(Rs) FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E
Coal India HOLD 130 155 960.8 865.1 979.3 1,145.8 274.6 179.8 228.1 305.9 167.0 103.8 132.0 180.3 27.1 16.8 21.4 29.3 2.1 2.8 2.1 1.4 4.8 7.7 6.1 4.5
Hindalco Industries BUY 165 180 1,181.4 1,180.1 1,326.3 1,374.0 143.1 133.3 155.5 155.9 39.5 38.4 51.2 50.4 17.8 17.3 23.0 22.7 5.3 5.5 4.5 4.1 9.3 9.5 7.2 7.3
Hindustan Zinc Acc 193 195 185.6 163.8 206.0 223.5 88.5 72.3 91.7 92.1 68.1 49.1 66.4 70.2 16.1 11.6 15.7 16.6 6.8 7.4 5.0 3.9 12.0 16.6 12.3 11.6
Jindal Steel & Power BUY 164 180 370.0 355.7 396.6 405.6 78.5 76.9 84.4 88.0 -2.9 -5.9 1.0 6.4 -2.9 -5.8 1.0 6.3 5.9 6.5 5.5 4.9 -57.1 -28.2 167.9 26.0
JSW Steel Reduce 197 140 730.8 679.9 908.2 871.6 116.2 103.9 163.9 168.1 41.3 10.0 37.5 73.3 17.1 4.1 15.5 30.3 7.8 9.8 6.3 5.7 11.6 47.8 12.7 6.5
NMDC Acc 86 87 117.0 101.1 105.5 116.9 60.1 48.9 49.8 56.4 36.1 36.4 37.1 41.7 11.8 11.9 12.1 13.6 4.1 4.9 4.9 4.3 7.3 7.2 7.1 6.3
Steel Authority of India Reduce 37 25 599.0 564.2 704.1 738.2 28.3 27.3 81.8 89.9 -24.9 -29.1 5.5 11.1 -6.0 -7.1 1.3 2.7 22.3 24.2 8.4 7.5 -6.1 -5.2 27.5 13.7
Tata Steel Reduce 345 250 1,398.2 1,344.4 1,493.4 1,517.3 169.9 164.4 217.3 213.6 17.9 -5.9 29.9 26.3 15.6 -5.2 26.1 22.9 8.3 8.8 6.7 6.8 22.1 -66.4 13.2 15.0
Source: Company, PL

July 9, 2020 9
 Metals & Mining
Analyst Coverage Universe
Sr. No. Company Name Rating TP (Rs) Share Price (Rs)
1 ACC BUY 1,430 1,307
2 Ambuja Cement BUY 210 196
3 Coal India Hold 155 142
4 Heidelberg Cement India Accumulate 185 180
5 Hindalco Industries BUY 175 146
6 Hindustan Zinc Accumulate 195 169
7 Jindal Steel & Power BUY 150 109
8 JK Lakshmi Cement BUY 350 281
9 JSW Steel Reduce 140 166
10 NMDC Accumulate 98 85
11 Shree Cement Hold 19,000 22,452
12 Steel Authority of India Reduce 25 28
13 Tata Steel Reduce 250 327
14 The Ramco Cements Hold 600 646
15 Ultratech Cement BUY 4,300 3,787

PL’s Recommendation Nomenclature

Buy : > 15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly

July 9, 2020 10
 Metals & Mining

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Date: 2020.07.10 15:24:47 +05'30'
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