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Tata Stock Doubles Profit in 2 Years, Available at 33% Discount; Should You Buy?


Tata Steel Shares: Tata Steel share prices are down more than 33 per cent from their 52-week high and have inched closer to their 52-week low of Rs 991.80 apiece levels on NSE. Tata Steel‘s share price today opened with a downside gap of near Rs 15 per share and went on to hit an intraday low of Rs 1010.65 levels on NSE, around Rs 20 away from its 52-week low. However, the steel stock has had a good run in terms of financial performance during the financial year 2020-2021 & 2021-2022, in which it doubled its profit, as steel prices remained strong.

Experts have attributed the correction in metal prices, to the tune of nearly 25 per cent in the last few months, to the excise duty imposed. They said that after the government of India imposed excise duty on steel exports, they are not going to get much overseas business as they used to get in the last few years. Apart from this, monsoon season is fast approaching in which demand for metal products are expected to go down further. So, Tata Steel is expected to report lower Q1FY23 earnings in comparison to Q4FY22 numbers. They expected more weakness in the stock in next 2-3 months.

Punit Patni, Equity Research Analyst, Swastika Investmart Ltd., said: “Tata Steel Ltd. is facing a double whammy of falling realizations and rising raw material prices, and as if that’s not bad enough, the government of India announced a 15% export duty on finished steel products. This has led to a major sell-off in the steel sector and Tata Steel Ltd. has witnessed a 35% correction from its 52-week high price.”

Should You Buy the Dip?

Ravi Singhal, vice chairman, GCL Securities, said: “As we can see that after the government has reduced the taxes on the import duty of steel the stock is greatly under pressure. Still, we think it can go more down towards 800 levels.” Singhal, further stated that certain things to be noticed are China’s unlock and China’s stimulus package will enable the commodity price to sustain above. So, our recommendation is to try to accumulate between 900 to 800. Stop loss at 700, target 1270 to 1370, he added.

Experts further said that the medium to long-term outlook remains positive as the domestic demand remains positive due to the government’s infrastructure spending, private Capex revival, and rising housing demand. Further, China has decided to reduce steel production in the next decade to comply with the carbon emission norms and the developed nations are focusing on climate change and are planning to reduce the production of coal-based steel and increase the green steel production i.e. hydrogen and carbon-based steel. China curbing steel production and the rising focus of developed countries on green steel will reduce the global steel supply in upcoming years, creating a great opportunity for Indian steel manufacturers to fulfill the supply deficit. Indian companies have competitive advantages in terms of the good availability of low-cost iron ore and cheap labor.

Patni said: ” investors can accumulate this stock for the medium to long-term time horizon, but the near-term outlook depends on how long the export duty stays.”

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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