Steel prices are not getting support even due to slowdown in China. Domestic demand for steel is also weak. Its effect can be seen on the stock of Tata Steel.
Tata Steel Stock Price: The shares of the giant steel company Tata Steel are seeing a boom today and the Sensex is included in the top 30 gainers. However, the stock has remained under pressure for the past few months. After making a 1-year high of 1535 on August 16, it has fallen by 44 percent. At the same time, this year the stock has weakened more than 24 percent. The outlook on steel also looks weak. In such a situation, the veteran brokerage house has reduced the target price for the stock. He says that the company’s balance sheet is strong, but correction in steel prices will put pressure on it in the near term. In the recent past, there is little hope of getting support for the prices.
Steel prices not supported
Brokerage house Motilal Oswal has given neutral rating on Tata Steel and has set a target of Rs 965. Earlier the brokerage had given a target of Rs 1410 for the stock. The brokerage said that the correction in the prices of cooking coal was anticipated (in line with the reduction in steel prices in India), but it has been stable. Steel prices are not getting support even due to slowdown in China. Unless the Chinese government announces a massive stimulus to revive the economy, there will be a possibility of curbing economic activity.
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weak domestic demand
The brokerage says that Tata Steel will have higher-than-normal inventory as trading activities almost came to a halt after the 15 per cent export duty was imposed on steel. It is estimated that most steel mills (including Tata Steel) will prepare their monsoon shutdown schedules in advance. The reason behind this is weak domestic demand, negative to marginal EBITDA on exports and high investment pileup. At present, the situation is expected to normalize by the mid of 2QFY23. The brokerage says that Tata Steel’s RoE is estimated to be 15 percent by FY23. It was 45 per cent in FY22.
balance sheet strong
Brokerage house CITI has given an investment advice in the stock of Tata Steel, although the target price has been reduced from Rs 1800 to Rs 1085. The brokerage says that the balance sheet of Tata Steel is looking the strongest in the last 15 years. The brokerage house has reduced the EBITDA estimate of the company by 32 per cent/34 per cent on the lower realization.
What is the latest trigger
There are reports that Tata Steel has imported about 75,000 tonnes of coal from Russia in the month of May. The company has done so even after talking about shutting down the business with Russia. The company imported about 75,000 tonnes of PCI coal used in steel making from Russia’s Vanino port. Of which 42,000 tonnes were unloaded at a port at Paradip and 32,500 tonnes at Haldia on 18 May. There is also news that the company has said that the deal to import coal from Russia was done earlier.
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
