Neutral Tata Steel; target of Rs 433: Motilal Oswal

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Motilal Oswal 's research report on Tata Steel

Tata Steel’s (TATA) 1QFY21 consolidated EBITDA at INR5b (-91% YoY) was the weakest in the past 10 years. The COVID-19 crisis led to a sharp decline in both volumes and margins across all entities. -Margin outlook in Indian operations, however, is much better with prices bouncing back to near pre-COVID levels. Europe, though, should remain a drag with EBITDA losses expected to continue in the near term. We have raised FY21/FY22E EBITDA estimates by 16%/7% to factor in the improved outlook in Indian operations. However, leverage remains unfavorable at 6.8x FY21 EBITDA. Maintain Neutral.

Outlook

At CMP, the stock trades at 6.3x FY22E EV/EBITDA. Maintain Neutral with TP of INR433/share based on FY22E EV/EBITDA of 6.5x for Indian operations and 5x for Europe.

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