Tata Steel Share Price Rises Over 1% Following Q1 Results Meeting Estimates; Analysis from Brokerages
On Tuesday, Tata Steel’s share price demonstrated resilience by bouncing back from early losses and registering a noteworthy increase of over 1%. This positive movement was triggered by the company’s Q1 financial results, which were reported to be in line with analysts’ estimates. As a result of this favorable outcome, Tata Steel’s shares experienced a significant surge, climbing as high as 1.68% to reach ₹117.20 per share on the Bombay Stock Exchange (BSE).
Tata Steel’s consolidated net profit for the fiscal first quarter ended June 2023 witnessed a substantial decline of 92% year-on-year, amounting to ₹525 crore. This sharp drop in net profit can be attributed primarily to the weak performance of the company’s Europe operations.
In the corresponding period of the previous year, Tata Steel had reported a consolidated net profit of ₹7,714 crore. However, during the fiscal first quarter ended June 2023, the company’s consolidated net profit witnessed a significant decline, amounting to ₹525 crore. This represents a substantial year-on-year drop of approximately 92%, as mentioned earlier.
Moreover, when comparing the current quarter’s consolidated net profit with the immediate preceding quarter, Q4FY23, which stood at ₹1,566 crore, there was a sequential decline of about 63%.
In Q1FY24, Tata Steel’s consolidated total revenue from operations experienced a decline of 6.21% year-on-year (YoY), amounting to ₹59,489.66 crore. In comparison, during the same period in the previous year, Q1FY23, the company had recorded total revenue of ₹63,430.07 crore.
T V Narendran, the Chief Executive Officer & Managing Director of Tata Steel, addressed the company’s performance during the quarter, highlighting the challenges and opportunities faced in the global economic landscape. He mentioned that the global economic recovery encountered obstacles, which in turn affected commodity prices, including steel prices.
While the global economic recovery faced headwinds, the Indian market showed resilience, with domestic steel demand witnessing growth of approximately 10% on a year-on-year (YoY) basis. Despite this positive domestic demand, steel spot prices in India followed the trend of moderation, aligning with the global market cues. This indicates that despite the robust growth in demand within the country, the steel industry in India was impacted by the prevailing global conditions and price trends.
According to the company’s BSE filing, Tata Steel reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of ₹6,122 crore for the fiscal first quarter ended June 2023 (Q1FY24). The EBITDA margin for the same period was recorded at 10%.
Tata Steel clarified that its adjusted EBITDA for the fiscal first quarter ended June 2023 (Q1FY24) amounted to ₹6,238 crore. This figure takes into account certain adjustments related to foreign exchange movements on intercompany debt, receivables, and the British Steel Pension Scheme (BSPS).
CLSA, a reputable brokerage firm, provided its analysis on Tata Steel’s Q1 results, stating that the company’s financial performance was in line with market estimates. Notably, Tata Steel’s Europe operations faced challenges, experiencing a third consecutive quarter of losses. The profitability in the European segment was reported at $96 per tonne.
In addition to the rating, CLSA has set a target price of ₹125 per share for Tata Steel. The target price represents the brokerage’s estimate of the fair value of the stock in the future based on its analysis of the company’s financials, industry trends, and market conditions. It serves as a guide for investors, indicating the price level at which CLSA believes the stock could be fairly valued over the medium to long term.
Morgan Stanley, another prominent brokerage firm, has assigned an “Equal-weight” rating on Tata Steel’s stock. An “Equal-weight” rating suggests that the brokerage believes the stock will perform in line with the overall market or its sector peers. It indicates a neutral stance on the company’s future performance, implying that the stock is expected to achieve average returns compared to the market.
In addition to the rating, Morgan Stanley has set a target price of ₹110 per share for Tata Steel. This target price reflects the brokerage’s estimate of the fair value of the stock over the medium to long term, considering various factors such as the company’s financial performance, industry outlook, and prevailing market conditions.
Morgan Stanley has noted that Tata Steel’s consolidated EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) missed estimates in the reported quarter. The shortfall in EBITDA was attributed to weaker trends observed in Tata Steel’s European business segment.
As of 10:10 am, Tata Steel’s shares were trading on the Bombay Stock Exchange (BSE) at ₹117.20 apiece. This marked a 1.52% increase in the share price compared to the previous trading session.
