Goldman Sachs bullish on steel, has a buy on JSW Steel

MUMBAI: Goldman Sachs is bullish on the Indian steel sector as it believes the sector is in the middle of a multi-year upcycle due to higher spreads, rising domestic capacity and improving iron ore supply. The investment bank has .a neutral rating on Tata SteelBSE -0.07 % with target price of Rs 780. Goldman Sachs' target price on JSW Steel implies a potential upside of 17.45 per cent from Wednesday's closing level of Rs 268.20 on the BSE. Tata Steel has a potential upside of 3.67 per cent from Goldman Sachs' target price. Shares of Tata Steel ended at Rs 733.3 on Wednesday. The investment bank prefers JSW Steel over Tata Steel due to higher profitability and better valuations. "In a stable steel price and benign raw material cost environment, we prefer a low cost convertor (JSW Steel) over an integrated steel mill (Tata Steel). On our estimates, JSW Steel screens as attractive among global peers, while Tata Steel looks fairly valued," said Goldman Sachs in a note dated Tuesday. Goldman Sachs believes that JSW Steel is set to benefit from weaker global raw material prices and the Rs 26,800 crore capital expenditure announced by the company will help enhance its steel capacity by 5 million tones by the end of financial year 2019-2020.