Steel scrips are in demand on Thursday as improved realisations from steel price hikes are expected to enhance bottom lines of these companies.
Steel major Tisco (up 1.2% to Rs 150.50) and public sector steel major Sail (up 2% to Rs 9.75) led the gains among steel scrips. Others like Jindal Iron & Steel (Jisco) (up 5.5% to Rs 58.55), Bhushan Steel (up 5% to Rs 30), Ispat Industries (up 3.8% to Rs 5.40) and Essar Steel (up 2.4% to Rs 8.45), all moved upstream.
Expectations are high that steel companies will record strong growths for Q3 ended 31 December 2002. Tisco announces its Q3 results on 23 January 2003 and Sail announces them on 28 January 2003.
Steel shares under the lead of steel major Tisco have surged sharply over the last few months on the back of a series of steel price hikes. Tisco currently trades close to its 52-week high. Some domestic mutual funds including Prudential ICICI and Unit Trust of India have been actively buying the stock of late.
Back home, as per reports, steel prices may go up further by Rs 500 per tonne from February 2003 due to low inventory levels. Reports suggest that the current low inventory positions are prompting steel makers to hike prices.
The low inventory situation has been precipitated by rising exports as a result of increasing international steel prices (by almost 20% within a month). Flat steel product prices are also firming up in both, the domestic as well as the international market.
At the start of January 2003, steel makers had already hiked steel prices by an average of Rs 700 per tonne. According to reports, in the current fiscal (since April 2002), steel makers have already raised steel prices by Rs 5,000 per tonne.
Meanwhile, it has been reported that developing countries will continue to be exempted from protective duties on steel imports by the US. A group of US steel companies have urged the US government to include India and other developing countries in the list covered by the hefty import duties. The US last year imposed 8-32% duties on steel imports to protect the domestic steel industry.
For the quarter ended 30 September 2002, Tisco posted an impressive 642.6% rise in net profit to Rs 203.18 crore (Rs 2.03 billion) as against Rs 27.36 crore in the corresponding period of the previous year. Net sales rose by 14.2% to Rs 2,207.03 crore (Rs 22.07 billion), from Rs 1,932.93 crore (Rs 19.32 billion) in Q2 2001. Besides the hike in product prices enriched product mix with higher share of value added products boosted Tisco's Q2 profits.
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