Buy this metal stock for a 42% rise, according to IDBI Capital

Tata Steel T2FY22 Results

According to the brokerage firm, “Tata Steel’s EBITDA at T2FY22 was slightly lower than our estimate. India sales volumes increased 11% qoq to 4.58 million tonnes and EBITDA / t from India operations decreased 10% qoq to Rs 29,256 due to higher costs coking coal. “

IDBI Capital said that “Nonetheless, EBITDA / t from European operations increased 136% in QoQ to Rs15,609, due to higher inventories and higher prices despite lower shipments. in FY22 despite the growth in CAPEX given the recovery in the steel cycle). “

Highlights and rationale for the investment for Tata Steel according to IDBI Capital

Highlights and rationale for the investment for Tata Steel according to IDBI Capital

Excellent financial performance of European companies: European EBITDA increased 2.2 times the quarter to 33 billion rupees despite stable sales volumes of 2.1 million tonnes. Tata Steel SEA recorded a 12% increase in QoQ EBITDA to Rs4 billion (EBITDA / t of Rs7244). However, Tata Steel Long Products’ EBITDA declined 45% QoQ to Rs3 billion (EBITDA / t of Rs18.010) due to a sharp increase in the cost of raw materials.

Strong free cash flow; Expansion on Track: Despite an increase in working capital of Rs 38 billion and capital spending of Rs 21 billion, its free cash flow was strong at Rs 39 billion in the second quarter of fiscal year 22. Its 5 mtpa expansion continues to progress well as it ramped up a 6 mtpa pellet plant. The total CAPEX expenditure for FY 22 is probably Rs 100-120 billion.

Outlook: After a strong profitability performance in S1FY22, we expect S2FY22 to be stronger for Tata Steel India operations as Chinese steel restrictions are expected to keep steel prices firm. In addition, we believe that the strong profitability and restructuring of its European operations will lead to a further decline in net debt in fiscal years 22-24, although Tata Steel will continue to continue its growth investments in India. Therefore, we maintain our PURCHASE rating on the stock.

Buy Tata Steel with a target price of Rs 1,825

Buy Tata Steel with a target price of Rs 1,825

IDBI Capital stated in its research report that “We introduce estimates for fiscal year 24 into this report and roll over our assessment to estimates for fiscal 24. We are increasing our EBITDA estimates for fiscal 22 / fiscal 23 10% / 15% taking into account the firm steel prices that we expect to maintain over the coming year. We are increasing our target price based on the SOTP to Rs 1,825 (previously Rs 1,735) and maintain our BUY rating on the stock. “

Disclaimer

Disclaimer

This action is taken from the IDBI Capital brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author and the brokerage are not responsible for any losses caused as a result of decisions based on the article.

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