Tata Steel Well-Positioned As China Reopens, Say CLSA And JPMorgan

Global news flows will continue to dominate the outlook for the Indian metals sectors. A faster reopening in China and stimulus has provided a new lease of life for the sector although the improvement in the on-ground demand is still elusive, according to CLSA.

The domestic demand of steel is resilient and large steel capacity additions can keep dependence on exports high, the brokerage stated.

It is expecting steel prices to rise in the near term, in line with or at a discount to import parity, before softening in the following quarters.

• The brokerage upgraded the stock to 'outperform' with a target price of Rs 135 from Rs 90, implying an upside potential of 10.11%.

• The biggest beneficiary of a demand-driven upcycle in China. Visibility on the Kalinganagar expansion and Europe profitability is key.

• The brokerage has rated Tata Steel Ltd.' as 'overweight' with a target price of Rs 140, implying an upside potential of 14.19%

• With the steel environment improving, further price hikes in the domestic market and improvement in the European steel prices, Tata Steel is well positioned.

• Tata Steel European's footprint has materially declined and the India business should continue to increase.

• "Tata Steel KPO expansion of 5MT, large captive iron ore mining ramp-up and new brownfield expansion pipeline yield strong volume visibility with an improving balance sheet", JP Morgan Said.

• Tata Steel has reduced net debt by over Rs 50,000 crore in the last four years and the brokerage still expects at least $1billion per year going forward, even with capex.

Out of the 33 analysts tracking the company, 24 maintain a 'buy' rating, six recommend a 'hold' and three suggest to 'sell' the stock, according to Bloomberg data. The 12-month consensus price target implies a downside of 0.1%.