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Price trends were a mixed bag for both ferrous and non-ferrous players during the quarter. Steel—we expect margins to improve by ~Rs2,370/ton for our coverage stocks, mainly led by front-ended price hikes and lower coal costs during the quarter. Base metal producers should see a weak quarter, mainly led by weaker commodity prices due to the ongoing tariff-related uncertainties. Zinc/aluminum/alumina prices declined by 7.3%/7.1%/32% qoq in 1QFY26. A sharp correction in alumina prices would ease cost pressure for non-integrated players such as VEDL and partially offset price headwinds

Improved steel prices and lower coking coal costs to aid margins

We estimate margins to sequentially increase by ~Rs2,370/ton on average in 1QFY26 for steel companies, mainly led by higher steel prices. We expect (1) an average increase in steel realization of around Rs2,360/ton qoq across our steel coverage universe, led by qoq improved steel prices during the quarter, (2) qoq decrease in costs, mainly led by lower coking coal costs, partially offset by seasonally higher fixed costs, and (3) 1.8% yoy (-12.8% qoq) volume growth during the quarter for our coverage companies, led by growth in domestic demand.

* TATA—we estimate Europe to break even with US$2/ton EBITDA (-US$36/ton in 4QFY25), led by US$48/ton EBITDA in the Netherlands and reduced losses in the UK.

* NMDC—we estimate EBITDA/ton to increase sequentially to Rs1,958/ton (-17% yoy, +18% qoq) on the back of higher realizations during the quarter.

Non-ferrous: Weaker commodity prices to drag margins

We expect a weak quarter for base metal companies due to the decline in commodity prices in 1QFY26. On a qoq basis, zinc/aluminum prices decreased by 7.3%/7.1% and alumina prices decreased 32% qoq in US$ terms.

* HNDL—we estimate India EBITDA (standalone + Utkal) at Rs45.3 bn (+23% yoy, -15% qoq) and Novelis EBITDA of US$437 mn (-12.7% yoy, -7.7% qoq) with EBITDA/ton of US$450 (-14.4% yoy, -9.1% qoq) due to tariff impact in the US.

* NACL—we estimate alumina EBITDA at Rs5 bn (+413% yoy, -65% qoq) and aluminum EBITDA at Rs10.7 bn (+28% yoy, -21% qoq) on qoq decrease in alumina and aluminum prices.

* HZ—we estimate EBITDA to decrease 21% qoq (-2.9% yoy), led by lower zinc/lead prices and volumes on a yoy basis, partially offset by better silver prices.

* VEDL—we forecast 14.2% qoq decrease in EBITDA (-1.1% yoy) due to lower commodity prices of aluminum/zinc, partially offset by lower alumina costs.

Outlook clouded by macro uncertainty

We remain cautious on the metals space on account of the ongoing tariffrelated uncertainties and a challenging macro. We find better risk-reward in non-integrated steel producers such as JSPL/JSTL and retain SELL on integrated producers such as SAIL, TATA and NMDC. In base metals, HNDL is our preferred BUY and HZ is our top SELL.

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