Buy Tata Steel; target of Rs 625: ICICI Direct
ICICI Direct is bullish on Tata Steel recommended buy rating on the stock with a target price of Rs 625 in its research report dated November 17, 2020.
Nov 20, 2020 / 11:50 AM IST
ICICI Direct's research report on Tata Steel
Tata Steel’s Q2FY21 consolidated performance was better than our estimates on all fronts. For Q2FY21, sales volume for Indian operations were at 5.05 MT (up 72% QoQ, 22% YoY) while sales volume from European operations were at 2.27 MT (down 1% YoY, up 15% QoQ). Consolidated topline came in at Rs 37154 crore (up 7% YoY, 53% QoQ), higher than our estimate of Rs 34768 crore. Consolidated EBITDA was at Rs 6111 crore while adjusted EBITDA was at Rs 5425 crore, (our estimate: Rs 4495 crore). Standalone operations reported EBITDA/tonne of Rs12861/tonne (our estimate: Rs 12000/tonne) while European operations reported negative EBITDA/tonne of US$27/tonne (our estimate of negative EBITDA/tonne of US$35/tonne). PAT from continuing operations was at Rs 1635 crore.
On the back of increase in realisations, we expect a healthy H2FY21 for the company. We model consolidated EBITDA margin of 12.9% for FY21E and 15.6% for FY22E (H1FY21 consolidated EBITDA margin was 10.8%). The debt repayment drive also augurs well. We value the stock on SoTP basis and arrive at a target price of Rs 625. We upgrade the stock from HOLD to BUY recommendation.
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