Morgan Stanley in a report released just minutes ago has the following view on Indian Metals & Mining Sector,
Post the recent correction on the Sensex, stocks like Sterlite and Sesa Goa, which are witnessing strong volume growth and have good support
from strong cash balances, are indicating superior upside to us. While near term, metals price sentiment may remain volatile, we feel that global demand trends are improving and so metals prices, even if selectively, will see a rebound by late C2010. Iron ore is our preferred exposure to the sector while our global team has a muted outlook on aluminum and zinc.
We have changed our F2011/12 price forecasts for aluminum, zinc and iron ore by -5%/-5%, -9%/-8%, and +2%/+16%, respectively. Accordingly, our
EPS forecasts and price targets have also changed. Sterlite and Sesa Goa look attractive at EV/ EBITDA valuations of 5.4x and 3.3x, respectively, based on our F2011 forecasts. For Hindalco, even though we remain EW, we are more constructive than previously due to its fast progressing Greenfield projects.
Stocks and Target Price
Hindalco - 172
Sesa Goa - 509
National Aluminum - 309
Sterlite - 263
