The Hindu Business Line : Metal stocks shine on record high prices

The record high prices of non-ferrous metals including zinc, copper and aluminium in the global markets are sustaining the rally in share prices of local producers Hindustan Copper, Hindustan Zinc, Sterlite Industries, Hindalco and Nalco.

Analysts expect robust quarterly earnings in the March-ended quarter and the running quarter by these companies, thanks to higher margins.

Companies have hiked zinc, copper and aluminium prices by about 15 per cent in the last 2-3 months and with the global prices expected to remain firm for the next one-year, the outlook appears to be positive for these companies, they said.

"The March-end and June-end quarters' results for base metal companies will be good. The only issue is Indian companies may face resistance from buyers for price rise beyond a point," said Mr Deepak Jasani, Head (Research), HDFC Securities. Considering that the share prices have gone up substantially in the last few weeks, there may not be a big upside in these shares from current levels, he said.

"The sector may be a market performer from here on."

Hindustan Zinc shares have risen by 29.31 per cent over the last one-week period to Rs 552.60 from Rs 427.35 , while Hindustan Copper gained by 27.38 per cent from Rs 52.95 to Rs 67.45 over the same period. Sterlite Industries rose by 20.38 per cent from Rs 1,659.30 to Rs 1,997.40 from last Wednesday (March 29). National Aluminium (Nalco) went up by 7.54 per cent to Rs 308.15 from Rs 286.55 during the period.

Global trend

"Most of these companies have captive mines and will benefit from the global price increase," said Mr Pankaj Namdharani, Head (Equities), SPA Securities.

Analysts said global zinc prices are expected to remain firm as demand outstrips supply due to smelter closures. In the case of copper and aluminium too, the prices are not expected to fall.

"We expect the valuation of leading companies in the sector to improve further," said Mr Janish Shah, Head (Equity Research), Networth Stock Broking Ltd. However, smaller companies like Binani Zinc, which is a secondary player, will not see major benefits, he added.

Mr Jasani of HDFC Securities expects the Government to intervene if the companies continue to hike prices in line with the global prices. The increasing prices, he said, will put pressure on inflation, besides increasing costs on infrastructure spending.