Most brokerages have maintained their stance on Tata Steel Ltd.'s stock rating after the steel maker reported its earnings for the April-June period on Monday.
The company's net profit from continuing operations increased more than four-fold to Rs 933 crore during the reported quarter, led by strong operational performance and some exceptional items such as the sale of its investments in Tata Motors.
Here's what brokerages had to say about Tata Steel's Q1 earnings:
CLSA
- Stock rating: Maintains ‘Buy'
- Target price: Hiked to Rs 800 from Rs 710
- Commentary positive across businesses
- In the post-earnings call, the Tata Steel management was positive on the India business, given better demand and pricing outlook
- Tata Steel expects steel demand to improve in coming quarters led by normalisation of pre-GST destocking
- Company expects pickup in rural demand and government's focus on domestic steel procurement in public sector projects
- Pricing outlook has also improved led by sharp rally in global steel prices
- Evaluating its plans for Odisha phase-2 expansion and expects to reach a decision soon
- Believe that Tata Steel's multiples should expand led by better pricing, increasing demand and positive de-risking in Europe
Credit Suisse
- Stock rating: Maintains ‘Outperform'
- Target price: Hiked to Rs 720 from Rs 650
- Reported strong EBITDA during Q1FY18, beating estimates driven by both Indian and European operations
- EBITDA estimates rise as we increase realizations' forecasts and incorporate slightly higher volumes in Europe
- Payment of £550 million settlement would remove risk
Morgan Stanley
- Stock rating: Maintains ‘Outperform'
- Target price: Unchanged at Rs 625
- The key positive surprise was higher than expected EBITDA in European operations
- Weaker than expected performance in domestic operations was a key negative surprise
- Earnings momentum likely to improve in domestic business, remain flattish in Europe
- Decline in EBITDA/tonne reflects lower than expected realization and higher than expected costs
Axis Capital
- Stock rating: Maintains ‘Buy'
- Target price: Unchanged at Rs 690
- Q1FY18 consolidated EBITDA above estimates driven by higher profitability at its downstream subsidiaries and forex translation gains
- Remain bullish on India steel
- Definitive anti-dumping duty for next 4 years will benefit large domestic steel mills
- Capacity utilisation of domestic steel industry is poised to hit 90 percent in the next three years as no new major capacity is coming up
- Value the company at seven times FY19E enterprise value(EV) /EBITDA for India operations and six times for international operations
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