Buy Tata Steel; target of Rs 1745: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Tata Steel

TATA steel (TATA) reported Q3FY22 EBITDA in line with our estimates at Rs158.9bn (down 3.4% QoQ). While it came above consensus estimates (CE) by 4%. India operation’s EBITDA came above our estimates by 5% while Tata steel Europe (TSE) missed our expectation by 20% due to higher energy cost. Recent relaxation of monetary policy for real-estate sector and front loading of infrastructure spending reflects visible pressure on Chinese authorities to stimulate economic activity after registering meaningful slowdown over last two quarters. While, concerns on oversupply resulting from contraction in demand were addressed by commensurate curbs on production. Unlike past, this limited the intensity of Chinese mills to dump steel in exports markets. In the midst of low competitive intensity of Chinese mills and improving visibility on demand, abnormal surge in coking coal prices by ~27% in a month to All-time high level of US$445/t will be a pressure point for earnings of steel companies in next couple of quarters. Notwithstanding that, margins of Indian steel mills are significantly better than historical levels on back of strong steel prices.

Outlook

Underpinned by solid B/S, sound earnings outlook (with FY23e margins lower by 33% over Q3FY22) and attractive valuations, we reiterate BUY with TP of Rs1,745 (earlier Rs1,842), EV/EBITDA of 5.7x FY23e.

More Info on Trent

At 15:10 hrs Tata Steel was quoting at Rs 1,218.00, up Rs 35.10, or 2.97 percent.

It has touched an intraday high of Rs 1,221.90 and an intraday low of Rs 1,171.60.

It was trading with volumes of 485,399 shares, compared to its thirty day average of 384,411 shares, an increase of 26.27 percent.

In the previous trading session, the share closed up 0.57 percent or Rs 6.75 at Rs 1,182.90.

The share touched its 52-week high Rs 1,534.60 and 52-week low Rs 656.00 on 16 August, 2021 and 19 February, 2021, respectively.

Currently, it is trading 20.63 percent below its 52-week high and 85.67 percent above its 52-week low.

Market capitalisation stands at Rs 148,801.07 crore.

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