A day after Tata Steel announced its March quarter earnings, the company's share price rose in early trade on May 4. The Tata Steel consolidated net profit for the quarter ended May 3 came in at Rs 9,835.12 crore, up 37.3 percent from a year earlier.
The company also announced a 10:1 stock split. Tata Steel India grew 34 percent in its revenue to Rs 36,681 crore, and Tata Steel Europe increased 53 percent to Rs 26,389 crore, the steelmaker reported 39 percent year-on-year (YoY) growth in consolidated revenue.
Tata Steel's BSE filing noted that earnings before interest, taxes, depreciation, and amortization (EBITDA) rose six percent to Rs 15,174 crore, with EBITDA per tonne rising 3.7 percent to Rs 18,937 from the corresponding period last fiscal.
The following is what brokerages have to say about the stock and company after earnings:
According to the foreign research house, the target price will be raised to Rs 1,940 from Rs 1,900. In Europe and India, EBITDA per tonne was $241 and capex guidance was muted, the company said. CNBC-TV18 reported a 24 percent increase in JPMorgan's FY23 earnings estimate.
According to the brokerage, the stock has a hold rating and a target price of Rs 1,240. Sequentially, EBITDA declined five percent while adjusted EBITDA was flat. According to CNBC-TV18, the non-TSE subsidiaries were responsible for the EBITDA miss.
We have been surprised with the results of the European business, which could do well in the next quarter or two as well, said the brokerage.
In addition, China's economy is expected to slow down, putting pressure on steel prices. In India, a monsoon season is about to start, which will cap even further price increases from current levels (which are already near an all-time high).
Steel prices and coal prices, which are at a peak, cap further margin expansion while free cash flow (FCF) appears to support downside.
The brokerage said that its target price for the stock is Rs 1,500 based on SoTP (sum of the parts).
On the BSE, Tata Steel traded at Rs 1,298.20, up Rs 3.10, or 0.24 percent, at 09:20 hrs.
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