By Denny Thomas
BOMBAY, Jan 22 (Reuters) - Tata Iron and Steel Co Ltd , India's second-biggest steel maker, is expected to report a surge in quarterly profit on Thursday thanks to firm prices and a shift to high-value products.
A Reuters survey of eight brokerages forecast that TISCO's October-December net profit rose eight times from a year earlier to 2.8 billion rupees ($58.4 million). Net sales are seen up 13.8 percent at 21.64 billion rupees.
Compared with the previous quarter, net profit is seen up 38 percent, while net sales are seen falling slightly.
"The company is concentrating on high-value products, which would have boosted margins," said Kshitiz C Prasad, metals analyst at SBI Capital Markets.
Tata Steel has gradually raised the proportion of branded products in its portfolio and entered specialised segments such as auto panels.
Exports are also contributing more to total sales, comprising 12.5 percent of sales in the fiscal year to March 2003 against 7.3 percent in the same period a year ago.
PRICES SEEN RISING
Prasad said the average domestic price of flat products, which are used by auto makers and white goods makers and form two-thirds of TISCO's output, rose about 22 percent in the past quarter from a year earlier.
He expected the gains to be sustained due to strong demand and as Indian prices caught up with international prices, which they lag due to domestic oversupply.
"The key drivers have been stronger demand from China and consolidation of the industry in Japan, which is a key exporter in Asia," JP Morgan analyst Pradeep Mahtani wrote in a report released last week.
Analysts expected domestic steel demand to be robust in the coming quarters as cheap housing loans spur construction and auto sales continue to grow.
Motorcycle sales in April-December surged 37 percent from a year earlier, while truck and bus sales jumped 32.3 percent and car sales climbed 8.4 percent.
India's April-November industrial output rose 5.3 percent year-on-year versus 2.5 percent growth in the same period in 2001.
STEEL STOCKS SHINE
TISCO's shares have surged about 32 percent in the three months to Tuesday's close of 158.70 rupees in anticipation of strong earnings growth. The benchmark Bombay index rose just 12 percent in the same period.
TISCO shares were up 0.8 percent on Wednesday at 159.90 rupees.
"Our fair estimate is 180 rupees per share," Mahtani said in his report.
Analysts are bullish not only on TISCO, which has a 2.1 percent weighting in the Bombay index, but on the entire sector.
Steel stocks have hogged the limelight in recent months as the market factored in strong earnings.
State-run Steel Authority of India , the industry leader, has surged 66 percent in the past three months, Essar Steel jumped 40 percent while Jindal Iron and Steel Co leapt 80 percent.
Jindal Iron, the only steel maker to have reported results so far this earnings season, announced a profit of 298.6 million rupees for October-December, compared with a net loss of 153.4 million a year earlier.
($1=47.94 Indian rupees)