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Saturday, October 1, 2022

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India Metals And Mining – The New Reality Check: Dolat Capital

We downgrade our estimates for the coverage companies to factor in impact of-

  1. underlying commodity price damage as well as government intervention,

  2. higher than previously expected rise in bond yields, implying higher terminal rates for this hike cycle,

  3. significantly higher odds of a recession in the U.S. / markdown for global and India domestic demand.

The above headwinds, while known earlier, have intensified much more and hence the downgrades and lower multiples.

We downgrade our estimates and multiples factoring volume growth, profitability risk and account for slowdown.

Key risks to our stance are-

  1. inflation topping out earlier and sharper versus current consensus,

  2. China stimulus and reopening shifting sentiment for commodities,

  3. previous mentioned events lead to reversal in Indian government stand on export duties et al.

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