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Tata Steel Tanks 32% in 3 Months, Brokerages Cut Target Price; What Should Investors Do?


Tata Steel Shares:  Tata Steel‘s share price came into focus after Citi maintained a buy call on the stock. The stock has tanked over 32 per cent in the last 3 months amid inflation, interest rate hikes, and export duty concerns. However, brokerages seem to be divided on the future trajectory of the stock, which has delivered robust returns to investors in the last two years.

This comes at a time when the steel sector is reeling under immense pressure due to rising inflationary worries and muted demand after Covid-19 resurfaced in China, the largest consumer of metals and steel. Adding to the woes of the domestic metal products, the government of India has imposed a 15 per cent export duty on steel to cool down the prices. Media reports suggest the government is not willing to take back or reduce the export duty as demanded by the steel companies. The duty is 50 per cent on all grades of iron ore, 45 per cent on pellets, and 15 per cent on non-alloy steel except part of semi-finished steel.

According to the Indian Steel Association (ISA), the duty on steel would send a negative signal to investors and impact capacity utilisation. India could lose export opportunities and the decision could impact overall economic activity, it said.

Stock Price History

The stock which hit an intraday high of Rs 1,386.25 on April 6 is currently trading at Rs 867.05, translating into a decline of 59.88 per cent during the period. The large cap stock touched an intraday high of Rs 882, rising 2.42 per cent on BSE. Tata Steel shares are trading lower than 5-day, 20-day, 50-day, 100-day and 200-day moving averages.

Total 2.92 lakh shares of the firm changed hands amounting to a turnover of Rs 19.97 crore on BSE. The market cap of the firm stood at Rs 1.05 lakh crore on BSE. The stock hit a 52-week high of Rs 1,534.60 on August 16, 2022 and a 52-week low of Rs 843 on June 20, 2022.

What Do Brokerages Say?

Global brokerage Citi remains bullish on Tata Steel, maintaining a buy rating on the counter. However, it has slashed its target price to Rs 1,085 from Rs 1,800, signalling about a 25 per cent rise in the counter from the previous close.

Shares of Tata Steel have seen a sharp correction lately. The stock has plunged about 45 per cent from its 52-week high and is hovering close to its 52-week lows.

Tata Steel is trading at a P/B value of 0.8x, which is not below its mean of 0.7x. However, the stock may not hit 2020 levels of 0.5x, given the expectations of a stimulus from China.

Elsewhere, Motilal Oswal Financial Services believes the Tata Group firm’s standalone EBITDA for the first half of the ongoing fiscal can contract by 66 per cent, driven by lower ASP, muted demand, peak coking coal prices and higher base effect.

The cost structure will only benefit from the reduction in coking coal prices that too for 70-75 per cent of requirement as India operations are captive on coking coal for the balance, it added.

“It also slashed its consolidated EBITDA estimate for FY23 by 22 per cent on the back of lower than expected sales volumes, reduction in ASP and higher coking coal costs,” said the brokerage firm.

Motilal Oswal Financial Services has maintained a neutral rating on Tata Steel but slashed its target price to Rs 965 from Rs 1,410 earlier.

Manoj Dalmia, founder and director, Proficient Equities, said: “Tata Steel is currently forming an inside bar after a trendy move it is now going sideways. It might turn volatile at the current price level. If it breaks the current level, then it might go downwards to Rs 768 levels. Some buying can be done at current levels and further at Rs 768. Recommend to accumulate at dip with a long-term view.”

Ravi Singh, vice President and head of Research, Share India, said: “Steel prices are not getting support due to slowdown in China. Unless the Chinese government announces a massive stimulus to revive the economy, there will be a possibility of curbing economic activity. Also, to limit the volatility in steel prices, China reintroduced several rules to control the trading. These set of rules resulted in significant cool of in the metal prices. Tata Steel stock may remain weak for some more days and value buying will trigger around Rs 950 levels.”

The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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