Motilal Oswal has given neutral rating to Tata Steel with a target price of Rs 433. The share price moved up by 1.73 per cent from its previous close of Rs 418.45. The stock’s last traded price is Rs 425.25.
Tata Steel Ltd., incorporated in the year 1907, is a Large Cap company (having a market cap of Rs 4641.91 Crore) operating in Metals – Ferrous sector.
Financials
For the quarter ended 30-06-2020, the company reported a Consolidated sales of Rs 24288.51 Crore, down 28.08 % from last quarter Sales of Rs 33769.95 Crore and down 31.35 % from last year same quarter Sales of Rs 35382.16 Crore. The Company reported net profit after tax of Rs -4663.13 Crore in latest quarter.
Investment Rationale
Outlook for Indian operations is much improved by better domestic demand and prices. However, FCF generation would likely be limited as working capital has already been squeezed out and may now expand on higher receivable days. Tata Steel Europe should remain a drag, with EBITDA loss expected in FY21 and PAT loss in FY22E. Despite curtailing growth capex, the brokerage expects net debt to EBITDA to remain high at 6.8x in FY21 and 4.3x in FY22E. At CMP, the stock trades at 6.3x FY22E EV/EBITDA. It maintains neutral with target price of Rs 433/share based on FY22E EV/EBITDA of 6.5x for Indian operations and 5x for Europe.
Promoter/FII Holdings
Promoters held 34.4 per cent stake in the company as of June 30, 2020, while FIIs held 11.8 per cent, DIIs 30 per cent and public and others 23.7 per cent.