Buy Tata Steel; target Rs 285: ICICIdirect.com

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26 Aug, 2025 12:21

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ICICIdirect.com's report on Tata Steel

"Tata Steel reported a healthy set of Q1FY14 numbers driven by higher realisations QoQ coupled with better-than-expected sales volumes from Indian operations. European operations also reported a robust operational performance supported by higher contractual realisations sequentially, which led to positive surprise on the margins front for Tata Steel Europe (TSE). Tata Steel India reported quarterly steel sales volume of 2 million tonne (MT) while EBITDA/tonne came in at Rs 14172/tonne (I-direct estimate: 1.9 MT, Rs 14035/tonne). The positive surprise came in from European operations wherein the company reported EBITDA/tonne of Rs 2475/tonne (US$44/tonne) sharply higher than our estimate of Rs 280/tonne (US$5/tonne). During the quarter, the total operating income stood at Rs 32804.8 crore, lower by 3.0 percent YoY & 5.3 percent QoQ. The EBITDA margin during the quarter stood at 11.2 percent while the consequent EBITDA stood at Rs 3688 crore (I-direct estimate: 9.1 percent, 2949.4 crore). On the back of deferred tax credit (Rs 415.2 crore) on its overseas subsidiaries the consequent PAT came in at Rs 1139 crore. Improving operational efficiencies at TSE bode well for the company. However, its sustenance, going forward, will be the key parameter to look out for. We also believe Tata Steel India will steadily increase its contribution towards the company’s profitability at the consolidated level, going forward."

"The company is witnessing a significant shift in its business composition wherein notable capacity expansion is being carried out in the high margin domestic business segment. At TSE, the company completed upgradation of two key facilities in Q4FY13, which resulted in improved performance in Q1FY14. We have revised upward our TSE EBITDA/tonne assumptions for FY14E from US$15/tonne to US$20/tonne. We continue to maintain BUY rating on the stock with a target price of Rs 285," says ICICIdirect.com research report.

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