1:10 Split, Rs 299/Sh Dividend: Tata's 116-Yr-Old Steel Co Big Update On £1.25 Bn Deal; Accumulate Stock

Tata Group-backed 116-year-old steel giant, Tata Steel is set to make a big update for employees in the UK business on May 15. On Tuesday, Tata Steel shares rallied by nearly 1.6% to hit an intraday high of Rs 163.85 apiece on BSE. The stock is nearing Prabhudas Lilladher's target of Rs 170. The brokerage has continued to recommend ACCUMULATE on Tata Steel despite the stock gaining by nearly 54% in a year.

At the time of writing, Tata Steel stock traded at Rs 165.40 apiece, up by 1% on BSE with a market cap of Rs 2,06,288.89 crore. The stock continued to be trending in green. The stock's 52-week high and low are at Rs 170.70 apiece and Rs 104.10 apiece respectively.

YTD, Tata Steel shares are one of the biggest gainers in the metal segment. In 2024 so far, the stock zoomed by 18.44% on BSE, while in a year, the stock rallied by 54% one of the top performers on YoY levels.

Tata Steel's Big Update On May 15:

Last month, Tata Steel announced that after a 7 months of formal and informal national-level discussions with the UK trade unions, Tata Steel will proceed with its £1.25 Billion investment to build a state-of-the-art Electric Arc Furnace in Port Talbot and commence closure of the existing heavy end assets in the following months.

Accordingly, Tata Steel has informed the trade unions that Port Talbot's two Blast Furnaces No.5 and No.4 will close by the end of June, and by the end of September respectively.

Further, it had mentioned that the multi-union proposal to maintain one blast furnace through the transition would have incurred at least £1.6 billion of additional costs (including higher operating costs and higher capital expenditure), created significant operational and safety risk, and put the business's future continuity in jeopardy.

Thereby, Tata Steel has offered its most generous severance terms ever to impacted employees, under a financial support plan, alongside wide-ranging retraining and community support schemes.

Also, on May 15, the company will be launching a Voluntary Redundancy Aspiration process for these employees, allowing exiting voluntarily with benefits.

Tata Steel has begun preparations to place equipment orders for the Electric Arc Furnace by September 2024, begin enabling and preparatory works at the site by December 2024, and based on current permitting timelines, begin construction on the project by August 2025.

ACCUMULATE Tata Steel Share:

As per the latest report of Prabhudas Lilladher on metal monthly dated May 8, 2024, domestic demand is holding up despite hiccups (~9% in April) which is supporting pricing. Amidst the muted external environment and gradual Chinese recovery, prefer players with higher volume growth.

Accordingly, Prabhudas has continued to give ACCUMULATE on Tata Steel shares for a target of Rs 170.

Prabhudas expects Tata Steel's EBITDA to rise to Rs 371 billion by FY25, and to Rs 464 billion by FY26. Also, EPS is expected to rise to Rs 13.3 per share by FY25, and Rs 18.6 per share by FY26. ROCE is expected to jump 15.2% by FY25 and 18.9% by FY26.

Tata Steel has a strong and consistent track record of paying hefty dividends to its investors. Since its first bonus issue year, Tata Steel has delivered a whopping Rs 299.35 per share to its investors as a dividend to date. In 2023, the company paid a dividend of Rs 3.60 per share. But its highest dividend payout is Rs 51 per share in 2022, the time its share split. In 2022 alone, Tata Steel paid the most dividends of Rs 63.75 per share. Currently, Tata Steel has a dividend yield of 2.18%, also among the top-yielding stocks in the metal sector.

Tata Steel has issued 1 bonus share to its investors in the past. It was in August 2004, that the turned ex-bonus for a bonus ratio of 1:1. While Tata Steel has turned ex-split only once and it was in 2022. The company's 1 equity share having a face value of Rs 10 each was split into ten smaller shares having a face value of Rs 1 each, hence a ratio of 1:10.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns. in advises users to consult with certified experts before making any investment decision.