Shares of Tata Steel closed above the Rs 100 mark for the 22nd straight day today signaling that the stock was in a consolidation mode since October 18. Tata Steel stock ended at Rs 100.60 on October 18 and has remained above the three digit mark since then on a closing basis. It ended at Rs 105.50 on BSE today. In the current trading session, Tata Steel shares were among the top Sensex losers. The Tata Steel stock has been falling for the last four sessions. It closed at Rs 105.85 in the previous session on BSE.
Tata Steel shares are trading higher than the 20 day, 50 day and 100 day moving averages but lower than 5 day and 200 day moving averages. The large cap stock has lost 11.11 per cent in a year and fallen 5.08 per cent in 2022.
On October 17, the stock closed at Rs 99.55 on BSE. Considering the recent movement, the stock is on the verge of giving a breakout, said analysts.
Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking said," The share of Tata Steel is on the verge of generating a breakout above the falling channel line adjoining the lows of Dec'21 and June'22 and on the upside the parallel stripe, recognizing the high of Apr'22. Against such a price structure, the immediate breakout level for the stock is around 108, successive trades above it would accelerate the buying sentiment and a higher level of 140-145 can be seen (channel pattern target). The past few days of volume concentration also indicate that the stock is on the path toward a breakout. Recent price consolidation at 97 can be earmarked as the elevated support base. However, its inability to sustain above the earmarked resistance level of 108 has called for a muted outlook, and lower levels 97-100 need to be explored for a medium to long-term approach. On the oscillator's front, the daily 14-period RSI has generated a sell signal with a price reading of 52 which indicates an upcoming price consolidation."
The Tata Steel stock has risen nearly 5% since Q2 earnings of the Tata Group’s metal firm were announced. The stock closed at Rs 101.55 on October 31. The earnings were announced after market hours on the same day. The share rose 4.92% since then compared to the previous close of Rs 106.55.
The firm reported a weak set of numbers for the quarter ended September 2022. Tata Steel’s September quarter consolidated profit plunged 90 per cent to Rs 1,297 crore, hit by higher expenses. The Tata group firm had reported a profit of Rs 12,547.70 crore in the same quarter last year.
Shares of Tata Steel have declined 24.61 per cent from their 52-week high of Rs 138.63 hit on April 6, 2022. Market cap of the Tata Group firm fell to Rs 1.28 lakh crore on BSE today. Total 19.73 lakh shares of the firm changed hands amounting to a turnover of Rs 20.81 crore.
Here’s a look at what lies ahead for the Tata Group stock.
Abhijeet from Tip2trade said the Tata Steel stock can be bought only if its daily close is above Rs 114.
“Despite poor Q2FY23 results, a strong recovery in Indian markets due to a slight dip in inflation and expectation of lower interest rate hikes has led to a rally in metal stocks led by Tata Steel. Currently, 110-114 is a massive resistance zone for this stock. Investors can buy only if daily close is above 114 or on a dip near 93-95 for near term targets of 124-136," he added.
Jitendra Upadhyay, senior Equity Research Analyst at Bonanza Portfolio said, "Despite poor Q2FY23 results, a strong recovery in Indian markets is seen due to a slight dip in inflation, and the expectation of lower interest rate hikes led to a rally in metal stocks led by Tata Steel. The company is moving ahead towards of its 5MTPA Kalinganagar expansion and restarted NINL blast furnace within next 3 months of acquisition. In terms of manufacturing facility, presently Tata Steel is producing 34 million MT across its 5 facilities in India & abroad. Out of which in India only it is producing 20.6 MT and aiming to double it to 40MT by FY30, with focus on Kalinganagar and NINL. Further, spreads are expected to improve going forward with spot spreads trending higher than during Q2FY23. Net debt during the quarter increased to Rs 71 800 crore on account of payouts towards NINL acquisition, FY22 dividend and growth capex.
The company continues to remain focused on cost centric approach; operational improvements and efficient working capital management to enhance cash flows. We recommend buy call on Tata steel with an Buy rating in the ferrous space. The margins should benefit across segmental from gradual recovery in domestic market and favorable movement in raw material prices, especially coking coal, Tata Steel is among the top steel companies in the world with an annual crude steel capacity of 33 mn tonnes per annum."
JM Financial assigned a buy call on the Tata Steel stock with a target price of Rs 125. The market price of Tata Steel on November 2 stood at Rs 102.2.
The brokerage said, “The company is progressing well on its 5MTPA Kalinganagar expansion and restarted NINL blast furnace within three months of acquisition. Tata steel expects to increase capacity to 40 million tonne by FY30, with immediate focus on Kalinganagar and NINL. Further, spreads are expected to improve going forward with spot / 3Q spreads trending higher than troughs of 2Q.”
Leading brokerage firm BoB Capital Markets too is bullish on Tata Steel. It sees a potential upside of 25% with a target price of Rs 125 per share. It made the recommendation on November 2.
"We cut our FY23/FY24 EBITDA estimates by 31%/10% to reflect our outlook of margin compression in Europe in H2FY23, slower recovery in Indian operations to mid-cycle margin levels by FY24 and higher net debt. While we cut FY23/FY24 EBITDA/t by 37%/29% to US$ 129/US$ 72 for European operations, we broadly maintain our forecasts at Rs 15.4k/Rs 17.3k for India," the brokerage has said.
ICICI Direct in a report said that the Tata Steel stock has given a return of 159% over the last two years (from Rs 42 in August 2020 to Rs 109 levels in August 2022).
“We maintain our BUY rating on the stock. We value Tata Steel at Rs 130, based on SoTP valuation,” it said.
The brokerage cited key triggers for the future price performance which are:
1: With respect to Neelachal Ispat Nigam Limited (NINL), Tata Steel plans to restart NINL’s blast furnace in the next three months & ramp up capacity to 80-100 KT/month run-rate by Mar’23.
2. Tata Steel remains committed to its annual deleveraging target of US$1 billion in line with its capital allocation strategy to reduce debt.
ICICI Direct on November 2 said the Tata Steel stock can be bought with a target price of Rs 130, 19% higher to the market price of Rs 109.
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