Q4 metals preview: Steel firms’ EBITDA to improve amid price pressures, says Axis Sec; Coal India among top picks

Q4 Metals Preview: Axis Securities, in its report, indicated that in Q4FY25, the EBITDA for steel firms under its coverage, including Tata Steel and SAIL, is anticipated to show a quarter-on-quarter improvement primarily due to increased sales volumes and reduced coking consumption costs, although this will be slightly countered by a minor decline in steel price realisations.

For aluminium companies like Hindalco and NALCO, a robust year-on-year performance is expected in the quarter. Both EBITDA and EBITDA margins are projected to grow, driven by strong alumina prices (up 44% year-on-year) and an increase in LME aluminium prices (up 19% year-on-year), with sales volumes expected to remain stable or show year-on-year improvement. In the structural steel tube sector, the brokerage forecasts a stronger quarter for APL Apollo Tubes, whereas JTL Industries is likely to continue facing weak volumes due to ongoing market sentiment challenges on a quarter-on-quarter basis. The brokerage’s top picks are APL Apollo Tubes and Coal India.

“We lean towards domestic-focused companies and prefer APL Apollo Tubes and Coal India as Top Picks. We also like Hindalco, but recommend a ‘Buy on Dips’ approach amidst the volatile macro environment due to the impact of reciprocal tariffs, which has cast uncertainty over the medium-term demand prospects,” the brokerage said.

Q4FY25 Preview

Tata Steel

The brokerage anticipates a year-on-year decrease in consolidated revenue attributed to reduced steel price realizations in both India and Europe, although this may be somewhat counterbalanced by increased steel sales volumes. EBITDA is expected to fall by 6% year-on-year as a result of diminished sales realisations in India and Europe, which negates the advantages gained from lower coking coal costs and higher sales volumes.

SAIL

The brokerage predicts that SAIL’s sales volume will bounce back to 4.9 MT, reflecting a year-over-year increase of 9% and a quarter-over-quarter increase of 12%, with the fourth quarter typically being a strong season. It anticipates that revenue will drop by 6% compared to the previous year but rise by 7% from the previous quarter, influenced by the trend in HRC prices, which have fallen by 11% year-over-year and by 1% quarter-over-quarter.

Hindalco

The brokerage projects Aluminium sales at 348kt (a decline of 1.4% compared to last year and unchanged from the previous quarter), Copper at 125kt (a decrease of 7% year-over-year, but an increase of 4% quarter-over-quarter), and Novelis shipments at 940kt (down 1% year-over-year, though showing a recovery of 4% from the last quarter).

The shipments for Novelis in Q3FY25 were affected by the ongoing repercussions of the flooding in Sierre, Switzerland. The brokerage anticipates a 12%/8% year-over-year/quarter-over-quarter growth in consolidated revenue, driven by rising Aluminium prices. Expected EBITDA is projected to rise by 17%/5% year-over-year/quarter-over-quarter due to increased metal prices alongside reduced power expenses in India.

Coal India

Coal India’s coal off-take increased by 4% quarter-over-quarter and remained nearly unchanged year-over-year. The brokerage projected a 63% premium for e-auctions (compared to 76% in Q3FY25 and 66% in Q4FY24) and estimated e-auction volumes at 10% (consistent with 10%/11% in Q3FY25/Q4FY24).

The rise in coal off-take is expected to contribute to quarterly revenue growth, albeit partially counterbalanced by reduced e-auction premiums. Revenue is anticipated to be nearly stable year-over-year due to steady off-take growth and comparable e-auction premiums.

APL Apollo Tubes

As per the brokerage, sales volume reached an all-time high of 850kt, representing a 25% year-on-year increase and a 3% quarter-on-quarter rise. The brokerage anticipates that revenue and EBITDA will grow both year-on-year and quarter-on-quarter, driven by an increase in sales volume, although this will be partially counterbalanced by decreased sales realization.

EBITDA per ton is expected to rise year-on-year and quarter-on-quarter by 11% each, reaching ₹4,600 per ton, supported by a higher proportion of value-added products (heavy section tubes) in the sales mix.

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