Motilal Oswal's research report on Tata Steel
Our analysis of TATA’s FY23 annual report showed that despite an adverse macro-economic environment and geopolitical volatility, the domestic growth story remained resilient for the company. Steel demand in India is expected to mimic the GDP growth rate, driven by higher budgetary outlay toward infrastructure and higher private sector consumption. Steel demand is expected to remain robust across key sectors, such as construction, infrastructure, automobiles, railways and white goods. TATA remains buoyant about domestic steel demand over the next decade and is expected to almost double its domestic capacity to 40mt from 21mt. The capacity expansion will help TATA navigate steel cycles, capitalize multiple opportunities and simultaneously deleverage its balance sheet. TATA expects to resume its deleveraging exercise and targets to reduce its debt by USD1b in FY24.
Outlook
TATA is currently trading at 5.8x FY24E EV/EBITDA and we reiterate our Neutral rating on the stock with a SoTP-based TP of INR110.
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