ICICI Direct recommended hold rating on Tata Steel with a target price of Rs 350 in its research report dated August 08, 2019.
ICICI Direct's research report on Tata Steel
Tata Steel reported a mixed set of Q1FY20 numbers. EBITDA/tonne of India operations came in higher than our estimate while EBITDA/tonne of European operations came in notably lower than our estimate. Standalone operations reported sales volume of 3.01 million tonnes (MT) lower than our estimate of 3.2 MT. European operations reported steel sales of 2.26 MT, lower than our estimate of 2.5 MT. Bhushan Steel reported sales volume of 0.86 MT. The consolidated topline came in at Rs 35947.1 crore (lower than our estimate: Rs 37897.7 crore). The consolidated reported EBITDA came in at Rs 5377 crore against out estimate of Rs 5373 crore. Domestic operations reported adjusted EBITDA/tonne of Rs 13158/tonne, higher than our estimate of Rs 11750/tonne. Bhushan Steel reported an EBITDA/tonne of Rs 9128/tonne while European operations reported EBITDA/tonne of US$4/tonne (notably lower than our estimate of US$40/tonne). The company reported a consolidated PAT of Rs 702crore (lower than our estimate of Rs 1096.8 crore).
However, after a seasonally weak Q2, market conditions are expected to improve, wherein H2FY20 is expected to be better than H1FY20. We continue to value the company on an SOTP basis and arrive at a target price of Rs 350 maintaining our HOLD rating.
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