ICICI Direct Initiates Buy On Tata Stock For 18% Gains, 360% Dividend Income, Jumps 305.88% In 3 Yrs

Brokerage firm ICICI Direct initiates "Buy" on Tata Group's firm Tata Steel Ltd. with a target price of Rs. 130/share. It sees a potential upside of up to 185 from its current level, considering the assigned target price.

On May 02, 2023, the Board of Directors of Tata Steel, held a Board meeting and recommended a dividend of Rs 3.60/share of Rs. 1 each i.e. 360% for the financial year 2022-23. The dividend is subject to the approval of the shareholders of the company at the AGM scheduled on Wednesday, July 5, 2023.

Recommended A Dividend OF Rs. 3.60/Share

"Recommended a dividend of ₹3.60 per Ordinary (Equity) Share of ₹1/- each (360%) to the shareholders of the Company for the FY2022-23. The dividend recommended by the Board of Directors of the Company is subject to the approval of the shareholders at the ensuing Annual General Meeting (AGM) of the Company scheduled to be held on Wednesday, July 5, 2023. The dividend, if approved by the shareholders at the AGM, will be paid, subject to deduction of tax at source, on and from Monday, July 10, 2023," the company said in an exchange filing on May 02, 2023.

Q4FY23 Results

According to ICICI Direct, For the quarter, healthy performance from standalone operations aided Tata Steel's overall consolidated performance.

For Q4FY23, Tata Steel's standalone operations reported sales volume of 5.0 million tonnes (MT), up 8% QoQ, higher than our estimate of 4.9 MT. Tata Steel's standalone operations reported EBITDA/tonne of Rs. 16326/tonne, higher than our estimate of Rs. 13250/tonne. Tata Steel's European operations reported negative EBITDA/tonne of US$93/tonne against our estimate of negative EBITDA/tonne of US$110/tonne.

Tata Steel's consolidated operations reported a topline of Rs. 62962 crore, up 10% QoQ but down 9% YoY (our estimate of Rs. 59854 crore). Consolidated reported EBITDA for the quarter was at Rs. 7219 crore, up 78% QoQ but down 52% YoY, higher than our estimate of Rs. 5364 crore.

Consolidated EBITDA margin for the quarter was at 11.5%, higher than our estimate of 9.0% (7.1% in Q3FY23 and 21.7% in Q4FY22). Better than expected performance from Tata Steel standalone operations aided Tata Steel's consolidated performance in Q4FY23. Ensuing consolidated PAT for the quarter was at Rs. 1566 crore, higher than our estimate of Rs. 443 crore.

Buy for a Target Price of Rs. 130/Share

Tata Steel's share price has given a return of ~6% in the last six months (from ~Rs. 105 in November 2022 to ~Rs. 111 in May 2023). We maintain our BUY rating on the stock Target Price and Valuation: We value TSL at Rs. 130, based on SoTP valuation.

Stock's Current Market Price, & 52-Week High/Low
The shares of Tata Steel closed 1.23% higher at Rs. 111.05/share. It traded its 52 week high on May 4, 2022, at Rs. 133/share and 52 week low on June 23, 2022, at Rs. 82.70/share, respectively.

Stock's Returns

It has given 3.16% positive return in the past 1 week, whereas, it has given 6.68% positive return in 1 month. It has fallen 11.96% in the past 1 year. In the past 3 years, it has given a robust 305.88% positive return. In 5 years it has given 91.22% positive return in 5 years.

About - Tata Steel Ltd.

Tata Steel Group is among top global steel companies with an annual steel production capacity of ~34 million tonnes per annum (MTPA). Tata Steel (TSL) is one of the world's most geographically diversified steel producers, with operations and commercial presence across the world. TSL has been a part of the DJSI Emerging Markets Index since 2012 and has been consistently ranked among top 10 steel companies in the DJSI Corporate Sustainability Assessment since 2016.

Disclaimer - The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.