Dear VPers
Eventhough I don’t have any clue on how the margins of Steel companies would play out and how the overall cycle plays out, Price wise SAIL is moving up (weekly chart below).
I see the same trend for JSW steel and Tata steel which are at 52 week highs
I have some expectations on the cycle turn around and peak going by previous cycles. From the P/S chart below one can see that the peak P/S is 0.9-1.0 and the Peak to Peak takes 3-3.5 years.
So, If we expect the cycle to peak after 4 years from previous peak (May 25) the return expectations would be good. But that may not be possible until China economy (construction) comes back strongly. So, I assume that the cycle peaks only in 2 years from now.
My assumptions (expectations ) as follows
Sales = 1.2 lakhs and P/S= 0.85 implies the Market cap would be around 1 lakh which would be more 2.2x from current market cap
Disc: Have small exposure. Bought in last 30 days and may buy more
Praveen
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