Buy Tata Steel; target of Rs 700: ICICI Direct

ICICI Direct's research report on Tata Steel

Tata Steel reported a healthy Q4FY18 performance primarily on the back of higher realisations. The Indian operations posted sales volume of 3.03 million tonnes (MT) while European operations reported steel sales of 2.55 MT. The consolidated topline came in at | 36132 crore, up 7% YoY, 8% QoQ Domestic operations’ (TSI) EBITDA/tonne increased QoQ to | 15872/tonne (vs. Q3FY18: | 14025/tonne and Q4FY17: | 13586/tonne).

Outlook

We like Tata Steel given the integrated nature of domestic operations, which enables it to report higher EBITDA/tonne vis-à-vis its domestic peers. We value the stock on SOTP basis and arrive at a target price of | 700. We maintain our BUY recommendation on Tata Steel.