Motilal Oswal Reiterates BUY on Tata Steel with ₹210 Target Price Amidst Steady Revenue Growth

Motilal Oswal has released a research report on Tata Steel, reiterating its BUY recommendation with a target price (TP) of ₹210 per share, valid for September 2027. The report indicates that Tata Steel's revenue for the period was INR 347 billion, which was in line with expectations, showing a 7% year-over-year (YoY) and 12% quarter-over-quarter (QoQ) increase. This growth was primarily fueled by a rise in domestic deliveries.

Steel production reached 5.4 million tonnes (mt), up 7% YoY and 12% QoQ. Deliveries were also in line with estimates at 5.55 mt, marking a significant 9% YoY and 17% QoQ increase. This improvement in deliveries is attributed to the ongoing capacity ramp-up at the Kalinganagar plant and the successful relining of the G-blast furnace.

Despite these positive operational metrics, there was a partial offset from a drop in steel realizations.

Outlook

Motilal Oswal has largely maintained its earnings estimates for Tata Steel. At the current market price (CMP), the company is trading at approximately 6.8 times its FY27 estimated Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBITDA) and 1.9 times its FY27 estimated Price-to-Book (P/B) ratio.

Impact

This report provides a positive outlook for Tata Steel, suggesting potential upside for investors. The reiterated BUY rating and price target from a reputable brokerage firm like Motilal Oswal can influence investor sentiment and potentially drive demand for the stock. The operational improvements mentioned are key drivers for future performance.

Rating: 7/10

Explanation of Terms:

• YoY (Year-over-Year): Compares a company's performance metric from one period to the same period in the previous year (e.g., Q1 2024 revenue vs. Q1 2023 revenue).
• QoQ (Quarter-over-Quarter): Compares a company's performance metric from one quarter to the previous quarter (e.g., Q1 2024 revenue vs. Q4 2023 revenue).
• INR: Indian Rupees, the official currency of India.
• b: Billion. INR 347b means 347 billion Indian Rupees.
• mt: Million Tonnes, a unit of weight commonly used for bulk commodities like steel.
• CMP (Current Market Price): The current trading price of a stock on the stock exchange.
• FY27E (Fiscal Year 2027 Estimated): Refers to the estimated financial performance for the fiscal year ending in 2027.
• EV/EBITDA (Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization): A valuation multiple used to compare companies of different sizes, indicating the value of a company relative to its operating profit.
• P/B (Price-to-Book): A valuation ratio that compares a company's market capitalization to its book value. It indicates how much investors are willing to pay for each rupee of a company's net assets.
• SOTP (Sum-of-the-Parts): A valuation method where a company's total value is determined by valuing each of its business segments separately and then adding them up.
• TP (Target Price): The price at which a stock analyst or broker believes the stock will trade in the future.