Buy Tata Steel; target of Rs 818: HDFC Securities

HDFC Securities is bullish on Tata Steel has recommended buy rating on the stock with a target price of Rs 818 in its research report dated October 31, 2017.

November 03, 2017 / 16:06 IST

HDFC Securities' research report on Tata Steel

Tata Steel numbers missed estimates, (Consolidated EBITDA: Rs 47.2bn, 53.7% YoY, -5.1% QoQ, Est Rs 54.6bn), driven by lower spreads in European operations (EBITDA/T: USD45, (33.1)/(44.3)% YoY/QoQ, Est USD81). Domestic numbers remained strong (EBITDA/T: Rs 10,959, 50.2/1.6% YoY/QoQ, Est: 11,547). Kalinganagar ops reached full ramp-up in 2QFY18, with BF/downstream utilisations at 100%/95% respectively.

Outlook

With domestic spreads at historic highs, profitability should remain elevated for steel companies. For Tata Steel, the progression of the JV with thyssenkrupp in Europe is a key monitorable, as it would pare down debt. With domestic assets (Essar, Bhushan, Electrosteel) up for grabs under the insolvency resolution process, Tata Steel can add meaningfully to its portfolio at reasonable valuations. We remain constructive, with an unchanged TP of Rs 818.

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