Tata Steel shares flat after Q3 results. Here are stock price targets

Shares of Tata Steel Ltd were trading flat in Thursday's trade, a day after rising nearly 4 per cent on China policy easing, after the Tata group firm reported a net profit of Rs 515 crore profit for the December quarter, compared with a loss of Rs 6,511 crore in the September and Rs 2,224 crore in the year-ago quarter. The steelmaker will be hosting earnings conference call later today at 12.30 pm. 

On the consolidated basis, total operating income for the quarter came in at Rs 55,312 crore, down 3 per cent YoY, with steel sales volume of 7.15 million tonnes (flat on YoY basis). For the quarter, Ebitda stood at Rs 6,264 crore compared with Rs 4,268 crore in the September quarter, largely due to low raw material cost.

Motilal Oswal said Tata Steel's Q3 were a beat on earnings, driven by the India business, even as EU continues to struggle. The brokerage had expected profit of Rs 600 crore. Revenue, Motilal Oswal said, was 10 per cent below its  estimate of Rs 61,400 crore. The reduction in revenue was attributed to lower blended ASP, which stood at Rs 77,359 per tonne. Motilal said it was 6 per cent lower than is estimate of Rs 82,549 per tonne. 

Ebitda stood at was 25 per cent above Motilal's estimate of Rs 5,000 crore. Ebitda margin improved to 11.3 per cent and the beat was due to lower input cost in the India business, Motilal Oswal said. Ebitda per tonne stood at Rs 8,760 per tonne,  which was higher than Motilal's estimate of Rs 6,743 per tonne.

Shreyansh Shah, Research Analyst at  StoxBox said Tata Steel's numbers were robust, mainly due to healthy domestic demand that was able to set off weak numbers from its European subsidiary.

"The rising coking coal prices acted as a dampener. However, the negative factors didn’t let Tata Steel outgrow its Ebitda which saw a significant growth of 52.7 per cent on a YoY basis. The company’s all-around performance can be attributed to an uptick in steel prices amid strong demand fueled by heavy infrastructure spending, but higher coking coal costs weighed on the gains. The company’s expansion is in line and we believe that once the pain of its subsidiaries in the western part is accounted, it will have a healthy financial performance in the long term," Shah said.

"Additionally, the steel makers' strategy of leveraging pan-India growth and branded presence will help them to grow at a faster pace in the high-margin business in the medium term. With the Automotive Infrastructure & Construction segments seeing continuous improvement and an increase in government spending, our outlook for the steelmaker remains positive," Shah added.

ICICI Securities in a morning note called Tata Steel's quarter results 'healthy'. Morgan Stanley reportedly maintained its 'Equal weight' on the stock  with a target price of Rs 120 per share.  Domestic Ebitda helped both high realisation and better costs, ET NOW suggested, in a tweet, Morgan Stanley as saying. Consolidated Ebitda was even better despite weakness in Europe, ET NOW suggested the foreign brokerage as saying.

CLSA has maintained its 'Outperform' on Tata Steel, with a target price of Rs 145 per share. As per CNBC TV18, CLSA said  Tata Steel's India business profitability was sharply above estimates.

"Standalone operations reported adjusted Ebitda per tonne of Rs 16,903 vs Rs 13,564 in Q2FY24, i.e. a higher on QoQ basis. Europe revenues were £1,842 million and Ebitda loss stood at £276 million," ICICI Securities said.

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