Shares of Tata Steel jumped 47% in early deals on Wednesday after its consolidated net profit jumped 47% 9,756 crore for the quarter ended March 2022, mainly on account of higher earnings. The board has recommended a dividend of 51/sh and a stock split of 1:10 have also been proposed.
“Cost-wise, Tata expects volatility in coking coal prices, to remain within the marine iron ore range, and high European power and energy costs,” Jefferies said in a note. Shares of Tata Steel with a price target of 1,240, and sees lower steel prices as a major downside risk.
The European business surprised us positively and could also report a strong EBITDA for the next one to two quarters. However, with the slowdown in China’s economy, we expect steel prices to come under pressure. Besides, India will enter the monsoon season in the next two months, which will further push the prices up from the current levels, said brokerage Motilal Oswal.
“For Indian operations, volume growth will commence only in FY24E and hence, stocks remain a play on steel prices till then. Strong FCF supports the downside, while peak steel prices and coking coal prices limit any further margin expansion from current levels,” according to the brokerage, which has maintained its neutral rating on the metal stock with a target price of Rs. . 1,500.
“Tata Steel’s year-on-year numbers are healthy as the company has got the margin benefit of increase in metal prices throughout the year. In addition, Tata Steel has reported loan repayment 50,000 crores. Tata Steel’s 1:10 stock split is also going to attract smaller investors which will increase the trading volume of the stock. Avinash Gorakshakar, Head of Research, Profitmart Securities, said, “One can expect some upside in the short term.”
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.