05 Aug , 2021 By : Kanchan Joshi
Tata Steel shares have more than doubled this year amid the metal stocks rally on the back of surge in prices and demand recovery. Tata Steel share price has surged more than 110% this year, being the top performer on Nifty, and on course for its biggest annual jump since 2009.
Metals have been the top performers in July among sectors followed by real estate, with Tata Steel ( 23%), Hindalco ( 19%) being the top gainers during the said month.
Now, the second ratings upgrade in 2021 by S&P Global Ratings may also work in favour of the stock, believe analysts. “The stable outlook reflects our expectation that Tata Steel will continue deleveraging to improve its resilience to downturns," S&P said in a statement on Tuesday.
Tata Steel's debt is expected to drop by more than 30% to 600 billion rupees ($8.1 billion) by March 2023 from its March 2021 level, exceeding the company’s goal of reducing debt by at least $1 billion per year, according to S&P Global, which raised the firm to BB from BB-, following an upgrade in April.
Meanwhile, the stock’s sharp rally amid a bullish equity market means it is just a whisker away from analysts’ average 12-month target price of Rs1,425, reported Bloomberg. Still, of the 33 analysts tracking Tata Steel, 28 have buy calls, four have a hold rating and one analyst has a sell call, according to data compiled by Bloomberg.
The company is expected to report a record net income of more than 90 billion rupees on revenue of 523 billion rupees for the June quarter, according to Bloomberg estimates.
While steel producers globally are gaining from the surge in prices amid a demand recovery, India's Tata Steel with access to own iron ore sources, is also likely to benefit as major producers China, Russia and Japan are looking to curtail exports.
''Global steel trade has been witnessing structural change after two top exporting nations, i.e. China (revoked export rebates) and Russia (imposed export tax of 15% from August to December 2021) discouraged steel exports. Hence, steel would be more localized and average steel prices would be much higher in the next decade vs the last decade,'' Centrum Broking had said in a July 7 report.
India focus, growth visibility, and strong deleveraging made Tata Steel among Centrum's top picks. ''TATA’s focus on the growing and profitable India market, highest exposure to high-priced flat products (flats/longs of 80/20), and full iron ore integration till CY30 make it an attractive long-term play,'' the July 7 note stated.
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