Hold Tata Steel; target of Rs 561: Arihant capital markets

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26 Aug, 2025 12:21

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Arihant capital markets research report on Tata Steel “Tata Steel’s result came better than estimate which was driven by stellar performance from Indian operations. Indian operations performance was driven by more than expected realisations and higher volumes. EBITDA margins remained stable at 31% on YoY basis. At consolidated level revenues increased by 11% YoY but declined by 14% QoQ to Rs 36,427cr. EBITDA margins declined marginally on QoQ by 10bps to 11.7%, while profit after tax came in at Rs 337cr. PAT was impacted by extraordinary items which included a gain of Rs 1,310cr on sale of stake in Dhamra port and impairment loss of Rs 1,577cr in Mozambique mines.” “Tata Steel’s performance was mix in our view with stellar domestic performance at one end and weak European performance at other. Nonetheless, we believe European operations will see improved performance going forward on increased spreads. We rollover our fair value for Tata Steel on FY16 estimates. We have valued domestic operations at EV/EBITDA(x) of 6.5x, TSE at 6.5x and South‐East Asia operations at 6.0x. We have valued Tata Steel’s quoted investments (including holdings through Kalimati Investment Company Ltd.) at Rs 54 per share (assuming 25% discount). Our fair value, based on SoTP valuations, for Tata Steel stands at Rs 561 per share. At CMP of Rs 544 per share the stock is trading at FY16E P/E(x) of 9.8x and EV/EBITDA(x) 6.4x respectively. We recommend Hold rating on stock,” says Arihant capital markets research report. 

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