Tata Steel rises 3% on JV agreement with German company; CLSA maintains buy
Shares of Tata Steel declined 3 percent intraday Thursday despite strong numbers reported by the company for the quarter ended March 2017.
The company reported a consolidated net profit of Rs 14,688 crore for the March quarter, as against a loss of Rs 1,168 crore in the same quarter last year, benefiting from a one-time gain of Rs 11,376.14 crore from the restructuring of its UK business' pension scheme.
The revenue from operations grew to Rs 36,132 crore, up from the Rs 35,304.89 crore reported last year.
The company's total expenses rose to Rs 32,626.42 crore, around 5 percent higher than in the corresponding quarter last year. Cost of raw material, which accounts for the lion's share of overall expenses, rose only 4 percent on year to Rs 10,369.77 crore.
Operating profit margin for the quarter was 14.53 percent, 215 basis points lower than the 16.68 percent reported last year. This was because expenses, despite having grown at a muted pace, rose faster than the company's operating income.
Here’s how brokerage reacted post Tata Steel Q4 results:
Brokerage: Emkay Global | Rating: Buy | Target: Rs 809
Emkay Global has maintained buy rating on Tata Steel with a target of Rs 809.
The company's strong domestic business leads to the superior performance, its India EBITDA/T rises 17% YoY while EU & Southeast Asia business declines, said Emkay Global.
The Q4 consolidated revenue was better than estimates primarily due to better realisation.
Bhushan Steel acquisition and Brownfield expansion at Kalinganagar should be beneficial for the company, it added.
The Reserach house expect strong performance to continue on back of strong realisations, volumes
Brokerage: CLSA | Rating: Buy | Target: Rs 920
CLSA has maintained buy rating on Tata Steel with a target of Rs 920 per share. According to broking house, the margin outlook remains good, while margin beat was led by higher contribution of non-TSE subsidiaries.
CLSA raised FY19-20 EPS estimate by 7-11% and 6.3xFY19 EV/EBITDA is reasonable.
Brokerage: Edelweiss | Rating: Buy | Target: Rs 903
Edelweiss has maintained buy rating with a target of Rs 903. At current market price, the stock is trading at 5.5x FY20E EBITDA.
Tata Steel's Q4FY18 performance beat was largely due to favourable steel environment globally. Going ahead, the value-accretive Bhushan Steel deal and definitive agreement with TK are further sweeteners.
Brokerage: IIFL | Rating: Buy | Target: Rs 835
Broking house IIFL has maintained buy recommendation on Tata Steel with a target of Rs 835.
According to firm, European business operations were impacted by some operational issues at the plant in UK and Netherland.
Going ahead, margins are expected to improve due to improvement in steel price, higher volumes and flat to lower raw material price.
Brokerage: Motilal Oswal | Rating: Neutral | Target: Rs 705
Motilal Oswal has maintained neutral rating on Tata Steel with a target of Rs 705 per share.
The broking house raised estimates for EBITDA/t by 20% to Rs 15,972/t for FY19E and by 8% to Rs 12,958/t for FY20E on strong market dynamics for existing operation in India.
Brokerage: Prabhudas Lilladher | Rating: Buy | Target: Rs 830
Prabhudas Lilladher reiterated buy call on Tata Steel with target of Rs 830.
The brokerage remained extremely positive on the sector given the strong outlook on demand and structural restructuring of Chinese supplies.
Curtailment of exposure to Europe and sharp increase in share of domestic operations through organic and inorganic route makes Tata Steel one of the best candidate to play the strength in steel sector.
At 12:08 hrs Tata Steel was quoting at Rs 607.80, down Rs 14.25, or 2.29 percent on the BSE.
Posted by Rakesh Patil