Rs 100 to Rs 146 in two years: Why Rs 150 target still looks distant for Tata Steel shares

Shares of Tata Steel Ltd have traded in the zone of Rs 100 to Rs 146 in the last two years. The stock closed at Rs 103.16 on April 29, 2021, the first instance it crossed the key Rs 100 mark.  However, the Tata Steel stock is yet to hit the Rs 150 mark. The closest the stock came to the key level was on August 13, 2021 when it closed at Rs 146.13 on BSE. Tata Steel shares have been majorly on a downward slope since then. 

After the Q4 earnings of the steelmaker, brokerages have assigned new targets for the stock but with caution. The global business and demand outlook for the company’s products have prevented them from being extremely optimistic.  

CLSA has a target of Rs 125 on the stock. Morgan Stanley sees the stock at Rs 110 while BofA Securities has a target of Rs 132 on Tata Steel. 

Systematix Institutional Equities has assigned the highest target for the Tata Steel stock post Q4 earnings. It gave a target of Rs 145 against the market price of Rs 110. 

It mentioned that the near-term steel pricing is expected to remain weak driven largely by international factors such as faster than expected ramp-up in Chinese steel production post-reopening in January 2023 leading to higher exports etc.  This is likely to affect the performance of the stock in the near future. On the hand, the brokerage said margins are likely to trend higher driven by an even sharper reduction in raw material costs.  

Uncertainties over UK operations are also likely to affect the prospects of the stock, Systematix said.  

“Several heavy-end assets at Tata Steel UK (TSUK) will reach their end-of-life in the next 18-24 months and the company is evaluating the transition to green steel with the Government’s support. The discussions with the government have not progressed much over the last few quarters leaving much uncertainty around the UK operations,” it added.  

 Financial services firm Motilal Oswal sees the effect of global steel demand on the outlook of the stock. “Global steel demand is subdued as customers are currently under 'wait and watch' mode and Tata expects to clock lower volumes in 1QFY24 that could prevent outperformance of the stock in the near term,” the brokerage said 

“We have marginally raised our estimates to factor in the improved outlook with lower input costs. The stock is trading at 5.6x FY24E EV/EBITDA and 1.3x FY24E P/B and we believe it is fully priced in at current levels. We reiterate our Neutral rating on the stock with a revised TP of Rs 110 (v/s Rs 102 earlier),” the brokerage added.  

Centrum Broking has reiterated its buy call on the Tata Steel stock with a target of Rs 133 per share.  

“We increase our India volume estimate by 2% and expect Europe to be EBITDA positive in FY24 resulting 12% rise in estimated EBITDA. Also, rolling over to FY25, we revise our target price to Rs 133/share (Earlier: Rs118). We value India business at 6x FY25E EV/EBITDA & Europe and Others at 4x FY25E EV/EBITDA. Reiterate BUY,” the brokerage said. 

The Tata  Group firm reported a 82.5% decline in net profit at Rs 1,705 crore for the quarter ended March 31, 2023 against net profit of Rs 9,756 crore in the year-ago period. 

Revenue from operations slipped 9% to Rs 62,962 crore in Q4FY23 as compared to Rs 69,324 crore in Q4FY22. 

In the current session, the metal stock touched an intraday low of Rs 108.4,down 2.39% against the previous close of Rs 111.05 on BSE. Total 7.91 lakh shares of the firm changed hands amounting to a turnover of Rs 8.67 crore. Market cap of the Tata Group firm stood at Rs 1.33 lakh crore.  The stock has lost 15.22% in a year and fallen 3.33% this year.  

In terms of technicals, the relative strength index (RSI) of Tata Steel stands at 65.1, signaling it's neither tradingin the overbought nor in the oversold territory. The stock has a beta of 1.4, indicating very high volatility in a year. Tata Steel shares are trading higher than the 5 day, 20 day, 50 day and 200 day moving averages but lower than 100 day moving averages. 

The Tata Steel stock hit a 52-week high of Rs 131.66 on May 5, 2022 and a 52 week low of Rs 82.71 on June 23, 2022.  

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