Tata Steel, Lloyds Metals, IMFA: Why Anand Rathi is bullish on these 3 metal stocks for Q4

The report points to a clear recovery in domestic steel prices after the lows seen in December 2025, alongside steady demand from infrastructure and manufacturing. While raw material costs have also moved higher, Anand Rathi believes the increase in realisations is more than enough to support profitability in the near term. Against this backdrop, the brokerage has called out three names as its top picks, each with a different driver but a common earnings tailwind.

Anand Rathi on Lloyds Metals and Energy

Anand Rathi places Lloyds Metals and Energy Limited at the top of its preference list, driven by a sharp jump in volumes and a step-up in profitability. The brokerage expects the company to deliver one of the strongest earnings performances in the sector, supported by its iron ore mining exposure and recent capacity additions. Production volume is estimated to rise to around 9.07 million tonnes in Q4 FY26 from 1.40 million tonnes a year ago, while revenue is projected at Rs 6,969.2 crore and earnings before interest, tax, depreciation and amortisation at Rs 2,093.3 crore. This translates into a year-on-year growth of 484% in revenue and 701.7% in earnings before interest, tax, depreciation and amortisation, indicating a sharp operating leverage benefit.

The brokerage’s analysis rests on the company’s growing mining contribution, which is now a major profit driver. With iron ore prices firm and volumes scaling up, Lloyds Metals and Energy Limited is positioned differently from most steel producers that depend on external raw materials.

“Among our coverage universe, LLOYDSME is expected to deliver the strongest improvement in financial performance,” Anand Rathi says in its report.

The note further adds that iron ore sales volumes, adjusted for internal consumption, are expected to cross 7.1 million tonnes. This scale-up, combined with pricing support, is likely to sustain margins even as costs move higher across the sector.

Anand Rathi also draws attention to upcoming triggers, including the ramp-up of the newly commissioned copper plant in the Democratic Republic of Congo and progress on pellet plant expansion. These factors could support further earnings growth beyond the current quarter.

Anand Rathi on Tata Steel

Tata Steel remains a core pick in the large-cap space, backed by improving domestic pricing and a gradual recovery in its European operations. Anand Rathi expects consolidated sales volumes at around 8.4 million tonnes in Q4 FY26. Earnings before interest, tax, depreciation and amortisation per tonne is estimated at Rs 10,938, marking a 38.9% increase on a year-on-year basis.

The brokerage has recently upgraded its view on Tata Steel Limited, citing better earnings visibility across both domestic and overseas businesses. While legacy contracts in Europe continue to limit realisation growth in the near term, the broader trend remains supportive.

“We have recently upgraded Tata, factoring in the improving pricing environment, supportive policy backdrop, and better earnings visibility across domestic and EU operations,” Anand Rathi adds.

The report notes that domestic operations are likely to drive most of the earnings improvement, aided by higher steel prices and stable demand. At the same time, European operations are expected to turn earnings before interest, tax, depreciation and amortisation positive, which could reduce the drag seen in previous quarters.

Anand Rathi also points to policy support such as safeguard duties and carbon border adjustment mechanisms in Europe as factors that are helping sustain prices. However, it cautions that gas availability issues for some downstream operations could remain a key monitorable in the near term.

Overall, the brokerage sees Tata Steel as a relatively stable play within the sector, combining cyclical upside with improving cost control and policy support.

Anand Rathi on Indian Metals and Ferro Alloys 

Indian Metals and Ferro Alloys features in Anand Rathi’s top picks largely due to its positioning in the ferro chrome segment and steady demand from the stainless steel industry. The brokerage expects sales volumes to increase to 0.067 million tonnes in Q4 FY26 from 0.0644 million tonnes a year ago, while revenue is projected at Rs 740.2 crore. Earnings before interest, tax, depreciation and amortisation are estimated at Rs 146.9 crore, with earnings before interest, tax, depreciation and amortisation per tonne at Rs 21,918.

Although the growth is not as sharp as Lloyds Metals and Energy Limited, the company offers a more stable earnings profile, supported by pricing and operational adjustments. The shift from gas to liquid fuel is expected to reduce supply disruptions, even though it may lead to some cost pressure.

“With the shift from gas to Low-dropout Regulator (LDO), supply disruptions are unlikely in the near term, although this may lead to some cost pressures,” Anand Rathi says.

The brokerage also notes that Indian Metals and Ferro Alloys Limited benefits from its link to the stainless steel sector, which continues to see steady demand. However, it adds that any disruption in end-user production could affect offtake volumes.

Another factor to watch is the company’s expansion plans, including progress on recent acquisitions and greenfield projects. These could influence volume growth and margin trajectory in the coming quarters.

Conclusion

Anand Rathi’s latest sector note makes a strong case for a cyclical recovery in metals, led by steel price gains and supported by steady domestic demand. While rising raw material costs remain a concern, the brokerage believes that higher realisations are currently offsetting these pressures, allowing profitability to improve across most companies.

Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.