What should investors do with Tata Steel post Q2 results? Brokerage sees up to 50% upside

Global brokerages maintained their rating on Tata Steel post September quarter results but sees 20-50 per cent of upside in the next 12 months.

The most aggressive target price of Rs 1,950 on Tata Steel was put out by CLSA that translates into an upside of 50 per cent from Rs 1,298 recorded on 11 November on the BSE.

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The steelmaker on Wednesday reported a 654 per cent YoY rise in the consolidated profit at Rs 12,547 crore for the quarter ended September 30, 2021, against a profit of Rs 1,665 crore posted in the year-ago quarter.

The revenue from operations grew by 55 per cent on a YoY basis to Rs 60,283 crore against Rs 38,940 crore posted last year.

The EBITDA stood at Rs 16,457 crore, up 165 per cent YoY from Rs 6,213 crore posted last year. Its margin improved to 27 per cent in Q2FY22 against 16 per cent posted in Q2FY21.  

We have collated a list of recommendations from various global brokerage firms according to a Zee Business TV report:

CLSA: Buy| Target Rs 1950

CLSA maintained its buy rating on Tata Steel post Q2 results with a target price of Rs 1950.

Weak domestic business was offset by strong Europe. 2Q EBITDA was slightly below expectations on lower standalone profitability.
 
Europe profitability increased to US$211/tonne and was above estimates. The Standalone PAT fell 8 per cent on a QoQ basis to Rs30,700 and was below estimates.

Net debt fell Rs51bn on a QoQ basis with FCF impacted by an Rs39bn working capital increase and higher cash tax.
 
The Management expects Asian steel prices to remain rangebound. Indian prices to rise, and European prices to remain resilient

Jefferies: Buy| Target Rs 1600

Jefferies maintained its buy rating on Tata Steel post Q2 results with a target price of Rs 1600.

Macquarie: Outperform| Target Rs 1817

Macquarie maintained its buy rating on Tata Steel post Q2 results with a target price of Rs 1817.

JP Morgan: Overweight| Target Rs 1810

JPMorgan maintained its overweight rating on Tata Steel post Q2 results with a target price of Rs 1810.

The underlying Q2 consolidated EBITDA was broadly in-line with estimates. Tata Europe has lower volumes, higher energy costs, but EBITDA up 2x QoQ.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)