Iron & steel stocks rally up to 11% on strong March quarter results

Shares of iron and steel companies, largely from the S&P BSE Smallcap index, have rallied by up to 11 per cent in Thursday’s intra-day trade amid heavy volumes. This came after the companies reported strong earnings in the March quarter of financial year 2023-24 (Q4FY24).

Surya Roshni, Gallantt Ispat, Sarda Energy & Minerals, Welspun Corp and Vardhman Special Steels (VSSL) have surged between 5 per cent and 11 per cent in Thursday's intra-day trade. In comparison, the S&P BSE Sensex was up 0.41 per cent and the S&P BSE Smallcap index gained 0.29 per cent at 12:01 pm.

The steel sector has benefited from India’s strong economic growth, and industries such as automotive and consumer durables are expected to fuel steel consumption.

The growth prospects and steel industry outlook in India is favourable. Recent changes in export taxes and import duties on steel, complemented by the rising demand for affordable housing, infrastructure development and construction projects, has led to a pan-India need for steel metal.

Moreover, the Government’s initiative to make India self-sufficient has made room for sustainable urban development, construction of proposed logistics parks and industrial corridors – all adding to the meteoric demand for finished steel and steel as a raw material.

Steel tubes and pipes manufacturers aim to maintain a positive export momentum of value-added products, particularly API pipes, to various regions, including the Middle East, Europe, and Australia, despite facing geopolitical challenges.

Among the individual stocks, VSSL hit a record high of Rs 328.50, as it surged 11 per cent after reporting more than double net profit of Rs 32.79 crore in Q4FY24, against Rs 13.68 crore in Q3FY23.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 93.93 per cent year-on-year to Rs 57.54 crore, mainly due to increase in higher sales volume by 3.12 per cent. EBITDA per ton for the quarter was Rs 11,041. Revenue grew 4 per cent Y-o-Y at Rs 439.41 crore.

VSSL is one of India’s leading producers of special steels, catering to diverse requirements of automotive, engineering, tractors, bearings and allied industries. The company also takes care of steel requirements of select customers for forging applications.

VSSL entered into a strategic alliance with Aichi Steel Corporation (ASC) Japan, main material maker for Toyota. Further it said that its exports are expected to increase from 5 per cent in FY 2022 to 20 per cent – 25 per cent by FY27. The Ministry of Environment granted the company environmental clearance for expansion from 200,000 MT per annum to 280,000 MT per annum of rolled capacity.

On the other hand, shares of Gallantt Ispat locked in upper circuit of 5 per cent at Rs 309.25, also its record high on the BSE. In Q4FY24, the company’s consolidated net profit jumped 40 per cent YoY at Rs 95.39 crore. The company is engaged in the business of manufacturing Iron and Steel and power generation.

Moreover, stocks of Welspun Corp also rallied 7 per cent to Rs 604.15 on the back of nearly three-fold jumps in average trading volumes.

Over the past two years, the group had made significant investments in both organic and inorganic avenues, whilst diversifying from its core business of line pipes. These investments include semi integrated greenfield projects of DI Pipe and TMT bars segment along with the acquisition of Sintex-BAPL, which is expected to provide healthy diversification in its business profile.

While the majority of these investments have shown improvement in scale as well as profitability quarter on quarter in fiscal 2024, a sustained improvement in scale is expected with ramping up of capacities as well as profitability in these segments over the next fiscal, according to analysts.

Among the other stocks, Surya Roshni shot up 8 per cent to Rs 684 and Sarda Energy & Minerals surged 7 per cent to Rs 256.70 on the BSE in intra-day trade today.

Surya Roshni continued to maintain a robust order book of Rs 600 crore from the oil and gas sector and export market. Further, the company has guided for 10 per cent and15 per cent volume growth in Q4FY24 and FY25, respectively.. The company majorly exports to Saudi Arabia and Egypt in the Middle East. The company is also gaining traction from countries like Canada, Europe, Australia and New Zealand.