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Brokerages Upbeat On Tata Steel After Strong Q4 Earnings

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Most brokerages have maintained their outlook for the Tata Steel Ltd. stock as they remained bullish on the company’s prospects after it reported better-than-expected earnings in the March quarter.

A sharp increase in domestic operations and cutting down Europe exposure also augur well, they said.

“The positive surprise was a better-than-expected profitability in both the domestic and European steel businesses, helped by higher-than-expected realization,” Morgan Stanley said in a note. “As per management, realisations will improve sequentially. While this will partly be offset by higher input material price, we expect Ebitda per tonne to expand further with better realisation and reversal of a one-time cost in the March quarter.”

The country’s largest steelmaker reported a profit of Rs 10,190 crore for the three months ended March against a loss of Rs 1,294 crore a year ago, mainly on account of a one-time gain of Rs 11,376 crore due to a restructuring of its U.K. pension scheme.

Of the 29 brokerages, 24 have a ‘Buy’ rating on the stock and three have a ‘Sell’ call, according to Bloomberg data. The stock, trading 0.81 percent down at Rs 617 today, has declined 9 percent so far this year. The benchmark BSE Sensex has risen 5 percent during this period.

Here’s what other brokerages had to say about Tata Steel’s Q4 performance:

Prabhudas Lilladher

  • Reiterates ‘Buy’ with a target price of Rs 830, an upside of 33.4 percent from current levels.
  • Bullish on Tata Steel, mainly due to its increased domestic presence and lowering Europe exposure.

Investec

  • Maintains ‘Buy’; reduced target to Rs 777 from Rs 878 with an upside of over 25 percent from current levels.
  • Operational performance beat expectations in the fourth quarter led by better spread; earnings before interest, tax, depreciation and amortisation surpassed estimates by 10 percent driven by price growth.
  • Acquisition of Bhushan Steel to stretch the balance sheet.

Credit Suisse

  • Maintains ‘Outperform’; target price at Rs 860 with an upside of 38.4 percent from current levels.
  • Positive commentary gives comfort on 2018-19 profitability as well as acquisitions under the Insolvency and Bankruptcy Code proceedings.
  • Europe was hit by operational issues in the fourth quarter; better-than-expected performance in other regions cushioned the miss.

Also Read: India's Biggest Steelmakers Plan Record Output on Strong Demand

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