Tata Steel Q2 Review: Shares Gain On Upbeat Analyst Calls
Shares of Tata Steel gained as most analysts retained their 'buy' investment recommendations for the steelmaker, hoping its Europe division to perform better even as working capital built up and India business was a drag.
Its second-quarter net profit rose beating estimates but higher costs weighed on its operating income.
Shares of Tata Steel rose 3.11% in early trade on Friday but pared most of the gains to trade 0.75% higher as of 9:50 a.m. Of the 34 analysts tracking the company, 29 maintained a 'buy', four suggest a 'hold' and one recommends a 'sell', according to Bloomberg data. The overall 12-month consensus price target implies an upside of 34.8%.
The stock's trading volume was 5.7 times the 30-day average volume, for this time of the day.
Here's what brokerages have to say on Tata Steel's Q2 results:
Maintains 'buy' with a target price of Rs 1,950 apiece.
Q2 Ebitda slightly below expectations on lower standalone profitability.
Weak domestic performance offset strong Europe.
Domestic subsidiaries Tata Steel BSL Ltd. and Tata Steel Long Products Ltd. already reported weak results.
Standalone profitability disappoints.
Europe shines; the gap to peers to further bridge.
Working capital buildup, higher taxes on deleveraging.
Maintains 'overweight' with a target price of Rs 1,810 apiece.
Other expenses were sharply up at the India operations due to higher royalty expenses after the Mines and Minerals (Development and Regulation) Act law change.
Q2 broadly in line against elevated consensus estimates even as net debt reduction is large.
Tata Europe to further improve in the second half due to lagged pricing benefits.
Domestic steel prices have increased Rs 4,000-5,000 a tonne over October-November.
Coking coal prices should decline, thus aiding margins in Q4.
Standalone operations disappoint; Tata Steel turns around. Debt reduction despite working capital build-up is a positive.
Consolidated Ebitda missed our estimate of Rs 19,780 crore.
Standalone Ebitda per tonne of Rs 32,751 was lower than estimates mainly due to lower realisation.
Free cash flow was impacted by working capital increase of Rs 3,890 crore.