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2 Tata Group Stocks To Watch Now For Good Dividend & Strong Upside Potential
Tata Steel and Titan Company are two Tata Group stocks where investors can expect a high dividend yield and significant upside potential. For the fiscal year that ends on March 31, 2022, Tata Steel has recommended a dividend of Rs 51 per fully paid-up face value of Rs 10/- each (510 per cent) to the company's shareholders, which, if accepted by the shareholders at the AGM, will be paid on and from June 30, 2022. Titan, on the other hand, stated in a statement that the Board has recommended a dividend of INR 7.50 per share for FY'22, subject to shareholder approval at the upcoming Annual General Meeting. Following its Q4FY2022 performance, ICICI Securities has given Tata Steel a buy rating with a target price of Rs1,700, while Sharekhan has given Titan a buy rating with a target price of Rs. 2,900.
Tata Steel Ltd (TSL)
Considering one of the key investment rationale the brokerage firm ICICI Securities has said "TSL aims to create 10mtpa of additional long product portfolio by CY30, mainly driven by NINL acquisition (and subsequent expansion). The capacity will also be augmented by setting up multiple EAF across locations. NINL share purchase agreement has been completed; transaction is expected to close in Q1FY23. NINL capacity to be expanded to 10mtpa, currently steelmaking capacity is more than 1mtpa and the land bank is 2500acres. Captive iron ore mines have more than 100mnte of reserves. TSL is also looking to set up first 0.75mtpa EAF in North India close to scrap generating auto hub and looks for further modular expansions to South and West India."
The brokerage has claimed that "Tata Steel (TSL) surprised on deleveraging and capital allocation while consolidated print (Rs158bn of adjusted consolidated EBITDA) was in line. Q4FY22 witnessed ~Rs140bn of FCF, taking net debt to Rs510bn, down ~Rs150bn. TSL has paid Rs51/share in dividend (yield of 4%). Capital allocation has surprised positively for FY22; conservative capital allocation with capex through internal accrual and increasing shareholder return in an elevated steel price environment should also define FY23E, in our view. We maintain BUY on TSL with an unchanged target price of Rs1,700/share. We expect consensus earning upgrade post Q4FY22 results. TSL has announced a stock split of 10:1."
Titan
The brokerage firm Sharekhan has said "Titan Company's (Titan) Q4FY2022 performance was marred by multiple one-offs affecting revenue and profitability during the quarter. The company's consolidated revenue grew by 4.0% to Rs. 7,796 crore. Excluding bullion sales, revenue stood flat during the quarter. Revenue of the jewellery business (excluding bullion sales, decreased by 4%) was affected by multiple events such as Omicron affecting January 2022 revenue performance, while volatility in gold prices and global concerns impacted consumer sentiments. The watches and eye care division grew by 12% and 6%, respectively. Consolidated EBITDA margin stood at 10.2% in Q4FY2022 versus 10.9% in Q4FY2021. However, excluding one-offs, ex-gratia expense of Rs. 82 core, EBITDA margin stood at 11.2%. The same was sequentially lower due to high bullion sales affecting the mix and higher spends towards promotional/group events. The company is optimistic about strong recovery in growth in Q1FY2023, supported by factors such as postponement of the wedding season and improved footfalls."
"Titan's Q4FY2022 results were affected by multiple factors. The company has geared for expected high sales during the auspicious days and postponement of the wedding season, which will help in posting good performance for the jewellery business in Q1FY2023 and the quarters ahead. While the jewellery business is expected to post consistent double-digit growth, other businesses (including watches and eye care) are expected to scale-up fast with revamped strategies. Titan is well poised to achieve strong revenue and PAT CAGR of 19% and 28%, respectively, over FY2022-FY2024. The stock is currently trading at 73.4x and 57.4x its FY2023E and FY2024E EPS, respectively (EV/EBITDA of 48.9x/38.7x its FY2023/FY2024E EBITDA). Any correction from the current levels can be considered as a good opportunity to enter the stock from a long-term perspective. We maintain our Buy recommendation on the stock with an unchanged price target (PT) of Rs. 2,900," said Sharekhan.
Disclaimer
The stocks have been picked from the brokerage report of ICICI Securities and Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
