Tata Steel share rose 5% today after brokerages turned upbeat on the stock post management’s call with analysts. CLSA raised target price for the stock to Rs 1,450 per share. Prabhudas Lilladher recommended accumulate rating on Tata Steel with a target price of Rs 1,400.
Tata Steel in its analyst call reiterated its focus on capacity expansion in India.
The Tata Group firm said it plans to invest Rs 10,000-12,000 crore per annum for the next five years to scale up its India business.
The firm plans to pare debt by at least $1 billion (Rs 7,400 crore) on an annual basis in the next few years.
Buoyed by the firm’s positive management commentary, Tata Steel stock touched an intraday high of Rs 1,225, rising 4.99% on BSE. The stock has gained 7.21% in the last 3 days. Tata Steel stock is trading higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.
The Tata Steel share has risen 268.86% in one year and gained 89.23% since the beginning of this year.
Market cap of the firm rose to Rs 1.40 lakh crore on BSE.
Later, the share closed 4.38% or Rs 51 higher at Rs 1,217 against previous close of Rs 1,166.75 on BSE.
CLSA said, the deleveraging by the firm remains crucial. The brokerage is comfortable with two times net debt-to-EBITDA.
The risk-reward is attractive at the current levels, while current market prices imply a sharp correction in prices, which looks unlikely, it added.
Prabhudas Lilladher said, “Management shared capacity allocation policy focusing on expanding upstream steel capacity in India by 15 mnt beyond FY25 to 40mnt, augmenting downstream capacity with investment in CR, DI pipes, Tinplate, Tubes and Wires, entering businesses like EAF based steel, niche new materials business with product offerings of composites and Graphene and expand infrastructure and logistics to support the movement of expanded steel capacity.”
“Capex intensity would almost double based on annual capex guidance of Rs 100 bn-120 bn for next five years. However, strong earnings outlook and investment in high payback projects in India allays concerns associated with sharp rise in capex,” the brokerage added.
