Tata Steel’s stock soared in early trading on Wednesday as the company reported a 47 percent increase in its consolidated net profit for the quarter ended March 2022, to $9,756 crore, owing to greater revenue. The board of directors has suggested a 51/sh dividend and a 1:10 stock split.
“On the cost side,” Jefferies wrote, “Tata anticipates coking coal prices to remain volatile, seaborne iron ore prices to remain range-bound, and European electricity and energy costs to stay high.” Lower steel prices are a big downside risk, according to the firm, which has a Hold recommendation on Tata Steel shares with a price target of 1,240.
The European company has pleasantly pleased us, and we anticipate a solid EBITDA for the next one to two quarters. However, as China’s economy slows, we expect steel prices to fall. In addition, India will start its monsoon season in the following two months, limiting any additional price increases from current levels, according to stockbroker Motilal Oswal.
“Volume growth for the Indian operations will not begin until FY24E, thus the stock will remain a steel price play until then.” The high FCF supports the downside, while peak steel and coking coal prices constrain any further margin expansion from current levels,” according to the brokerage, which keeps its Neutral rating on the metal stock with a target price of $1,500.
“Tata Steel’s year-over-year results are solid, as the company has reaped the benefits of higher metal prices all year.” Tata Steel has also disclosed a debt repayment of Rs. 50,000 crore. Tata Steel’s 1:10 stock split will also attract small investors, resulting in an increase in the company’s trading volume. In the immediate run, the stock could see some upside,” said Avinash Gorakshkar, Head of Research at Profitmart Securities.