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Tata Steel shares in focus: Falling steel prices to affect target price?

Tata Steel shares in focus: Falling steel prices to affect target price?

Tata Steel share price today: Tata Steel stock, which stood around Rs 100 at the time of split, is currently trading at Rs 107 on BSE. Market cap of Tata Steel stood at Rs 1.30 lakh crore today.

Shares of Tata Steel have lost 26 per cent in a year and declined 3.6 per cent in 2022. However, the stock has gained 0.23 per cent in a week. Shares of Tata Steel have lost 26 per cent in a year and declined 3.6 per cent in 2022. However, the stock has gained 0.23 per cent in a week.

Shares of Tata Steel are among the mostly tracked bluechip stocks after they were split in the ratio of 1:10 on July 28. However, they have not moved much since July end. The stock which stood around Rs 100 at the time of split is currently trading at Rs 107 on BSE. However, the shares of India's largest steel firm were abuzz in early trade today as they gained after falling for three days. Tata Steel stock rose 1.79 per cent intraday today to Rs 107.65 against the previous close of Rs 105.75 on BSE.  

Shares of Tata Steel are trading higher than the 5-day, 50-day and 100-day moving averages but lower than 20-day and 200-day moving averages. Market cap of the firm stood at Rs 1.30 lakh crore today.

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Tata Steel stock has lost 26 per cent in a year and declined 3.6 per cent in 2022. However, the stock has gained 0.23 per cent in a week. Total 32.77 lakh shares of Tata Steel changed hands amounting to a turnover of Rs 35.09 crore on BSE. The stock hit a 52-week high of Rs 147.67 on September 14, 2021 and a 52-week low of Rs 82.71 on June 23, 2022.

The Tata Group firm has emerged among the top five profitable Indian firms in 2022. It posted a profit of Rs 33,011 crore in the last fiscal. However, earnings of Tata Steel were under pressure in the first quarter of the previous fiscal. Tata Steel logged a consolidated net profit of Rs 7,714 crore in Q1 against Rs 9,768 crore in the  corresponding quarter of FY22. The firm's India business saw net profit falling 36.5 per cent compared to the corresponding quarter of FY22. The net profit for India business dipped to Rs 5,783 crore in Q1FY23 against Rs 9,112 crore in Q1FY22.

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Worries over the falling steel prices across the world due to a decline in demand will keep the global steel stocks under pressure. This will not spell good for the domestic steel stocks.

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According to a report by Kotak Institutional Equities, steel prices and margins will remain under pressure in the future.  It has given a 'Reduce' call on the Tata Steel stock. "Domestic steel prices are down 20 per cent in the past three months led by regional price weakness. Prices should remain under pressure given the current premium to import parity and any relief from export duty reduction will only have limited benefits," said a report by Kotak Equities.  

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Here's a look at what analysts said about the outlook of the Tata Group stock.  

Manoj Dalmia, founder and director, Proficient Equities  

"Tata Steel stock is looking in a recovery mode. The stock has been forming higher high recently. We can expect a sideways move. Closing below Rs 103.30 can trigger selling in the stock. Investors can stay away for a while and accumulate the stock on dips with a long-term view."

AR Ramachandran, Co-founder & Trainer, Tips2Trades  

"After a stellar 2020 & 2021, expectedly Tata Steel and the other metal stocks have corrected sharply due to impending recession fears. Rs 102 remains a strong support. Only a daily close above Rs 114 should lead to Rs 135. Bias is more bearish as close below Rs 102 can lead to Rs 88-80 in the coming months."

Vinit Bolinjkar, Head of Research, Ventura Securities

"The company is working on simplification of its group structure by reducing its subsidiaries, associate companies, and joint ventures, especially in Europe. The company has brought down its legal entities from 300 in FY19 to 217 in FY22. 32 non-trading Tata Steel Europe Ltd subsidiaries are in voluntary liquidation (28 in UK and Ireland and 4 outside).

The restructuring plan will help the company to enhance its operational efficiency. But due to fears of lower demand especially from China, global steel prices have been falling, which soared as a result of the Russia-Ukraine war. This will impact the profitability of the company in the near to mid-term, which will create a hurdle for achieving a higher target per share.

Realizations increased by 11.8% on the back of higher export realisations and a fall in domestic steel prices with a lag. We believe that the company will be able to deliver a better performance which will lead to the target of Rs 134 (5X FY24 EV/EBITDA)."

Santosh Meena, Head of Research, Swastika Investmart

"The counter is on the track of forming the Right Shoulder of the Inverse Head & Shoulder. On the weekly time frame of Tata Steel, we can spot that prices have taken multiple support from the 61.80 percent of Fibonacci retracement level of Rs 82 level (June 2020). The counter is facing resistance at 200-DMA around Rs 115 level. Once it will cross 200-DMA, we will see a 140 plus target in the near term. The RSI plotted on daily and weekly time frames are above 50 and rising indicating strong momentum in the prices."