Jefferies Remains Bullish on Metals: Why Tata Steel and Hindalco Lead the Pack
Tata Steel and Hindalco : The Indian metals sector has been witnessing a surge in investor interest, particularly in stocks like Tata Steel, Hindalco, and JSW Steel. Analysts at Jefferies India Pvt Ltd have outlined key reasons for their optimism, forecasting a positive outlook for metals in 2025. With a solid performance by the Nifty Metals index, outperforming the Nifty-50 index by nearly 9% over the past month, and expectations of government interventions like safeguard duties, Jefferies is confident that the sector will continue to outperform.
1. Metals Outperforming the Nifty-50
As of 2025, metal stocks, especially Tata Steel, Hindalco, and JSW Steel, have significantly outperformed the Nifty-50 index. These stocks have gained 15-20% since the beginning of the year, driven by positive developments such as the recovery in China’s economy, expectations of safeguard duties on steel imports into India, and the steady performance of aluminum prices.
Jefferies analysts have pointed out that China’s residential property market might have hit its bottom in the last quarter of 2024. Secondary property market data continues to improve, with the average price of secondary homes in tier-one Chinese cities rising by 0.18% month-on-month in January 2025, marking the fourth consecutive month of price increases. This recovery is expected to have a ripple effect on demand for metals, boosting growth in the sector.
2. Soft Steel Margins May Recover While Aluminium Margins Remain Firm
Despite challenges, including the global tariff concerns and trade tensions, aluminum prices have shown resilience, rising by 7% year-to-date. This has surpassed China’s 3% decline in steel prices. Analysts expect this trend to continue, with aluminum prices holding strong globally. On the other hand, the Asian steel conversion differential remains 20% below the long-term average, indicating that there is room for steel margins to recover, especially if China’s real estate market continues its recovery. Jefferies remains positive on the potential for margin improvement across both aluminum and steel segments.
3. Safeguard Duties Could Boost Indian Steel Prices
One of the most significant factors contributing to Jefferies’ positive outlook is the potential for the Indian government to impose safeguard duties on steel imports, particularly from China. India’s local hot-rolled coil steel pricing corrected by 15% between June and December 2024 but has since recovered by 5%. As of now, steel prices in India are about 3% higher than the price of landed imports from China.
Any safeguard duty on Chinese steel imports could provide further support to local prices, benefiting Indian steelmakers. A Rs 1,000 per tonne rise in steel prices could lead to a 7% increase in Tata Steel’s and a 9% increase in JSW Steel’s FY26 estimated EBITDA. Earnings per share (EPS) for these companies could rise by 17% for Tata Steel and 23% for JSW Steel, assuming all other factors remain constant.
4. Continued Positive Stance on Hindalco and Tata Steel
Jefferies has maintained its positive stance on the metals sector, continuing to recommend buy ratings on Tata Steel and Hindalco. Both companies are expected to benefit significantly from the current market dynamics.
Hindalco, a leader in India’s aluminum sector, is seeing strong performance due to the steady global aluminum prices, with spot aluminum prices at $2,708 per tonne, well above Jefferies’ forecast of $2,600-$2,650 for FY26-27. Furthermore, concerns about Novelis’ margins have eased, further bolstering Hindalco’s outlook. The company’s robust performance is likely to support its long-term growth and profitability.
In conclusion, Jefferies remains optimistic about the Indian metals sector, with Tata Steel and Hindalco emerging as key beneficiaries of the ongoing trends in both aluminum and steel markets.
Financial Ratios: Tata Steel, Hindalco, and JSW Steel
| Company | FY26 Estimated EBITDA Growth | FY26 Estimated EPS Growth | Current Price (INR) | P/E Ratio (TTM) | ROE (%) |
|---|---|---|---|---|---|
| Tata Steel | 7% | 17% | 1,100 | 8.4 | 14 |
| Hindalco | 6% | 15% | 650 | 9.2 | 12 |
| JSW Steel | 9% | 23% | 800 | 10.5 | 16 |
Frequently Asked Questions (FAQs)
1. Why has Jefferies remained bullish on the metals sector in India?
Jefferies remains bullish due to the outperformance of metal stocks, the recovery in China’s residential property market, the potential for safeguard duties on steel imports, and the steady global aluminum prices. These factors combined are expected to drive growth and profitability in Indian metal companies, especially Tata Steel and Hindalco.
2. How will safeguard duties affect Indian steel prices?
The imposition of safeguard duties on Chinese steel imports is expected to lift Indian steel prices. As India continues to import steel, any rise in local prices would boost the margins of Indian steelmakers like Tata Steel and JSW Steel.
3. What are the growth projections for Tata Steel and Hindalco?
Jefferies projects a 7% increase in Tata Steel’s EBITDA and a 17% increase in its EPS for FY26. Hindalco is also expected to see strong performance with aluminum prices holding steady globally.
4. Which metal companies are considered top picks by Jefferies?
Jefferies has maintained a buy rating on Tata Steel and Hindalco, considering their strong growth potential. They have a hold rating on JSW Steel.
5. What is the outlook for aluminum prices?
Global aluminum prices are expected to remain firm, with spot aluminum prices currently at $2,708 per tonne. Hindalco’s aluminum business stands to benefit from this stability.
By following these insights and focusing on the fundamental strengths of Tata Steel and Hindalco, investors can remain confident in the Indian metals sector’s growth potential.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.