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Buy This Multibagger Tata Stock For Target Price Of Rs 140: BoB Capital Markets

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The brokerage firm BOB Capital Markets Ltd. has suggested buy the stocks of Tata Steel Ltd, a Tata Group stock, for a target price of Rs 140 apiece. If we take the company's Current Market Price and the estimated target price into consideration, the stocks have the potential to gain 31% over the next 12 months.

 

TATA is exposed to slower pickup in China but we expect Chinese demand to stabilise over H2, providing support to regional margins. It is a large cap metal stock of Tata Group having a market capitalization of Rs 1,31,147 crore.

Stock To Buy

Stock To Buy

The Current Market Price (CMP) of Tata Steel Ltd on NSE is Rs 107.35 apiece. The stock is trading Rs 24.65 above the 52 week low and Rs 46.1 below the 52 week high of the stock, respectively. Its 52-week low is Rs 82.70 apiece recorded on 23rd June 2022, and the 52-week high is Rs 153.45 apiece recorded on 16th August 2021.


Last week, the shares have fallen roughly 0.23% and gained 24.8% in the past 1 month, respectively. Over the last 1 year, it has fallen 16.41%. Over the past 3 and 5 years, its shares witnessed a jump of 168.88% and 86.42%, respectively. In long-term investment tenure, the stock has performed good and given multibagger returns to shareholders.

Exposed to slowdown in China...
 

Exposed to slowdown in China...

India's steel sector is directly exposed to developments in China which has a strong influence on regional pricing. With the latter's July PMI entering into a contraction zone, there is a possibility that demand pickup could take longer in China. This could put pressure on regional margins and pricing over the next quarter.

...but China to eventually provide support

...but China to eventually provide support

The brokerage said, "We believe the Chinese government's efforts to accelerate infrastructure projects to offset economic weakness will yield results. While the real estate situation is difficult, a decline is likely to be arrested if the government succeeds in completing unfinished projects. With the election of the Chinese premier due in Mar'23, we believe the government has a strong incentive to stabilise the economy over H2CY22. This could help steady regional margins."

TATA also expects recovery in H2FY23

TATA also expects recovery in H2FY23

Management expects margin improvement from Q3FY23 as the benefit of lower coking coal costs would feed through the cost base. Demand growth will also be underpinned by a rebound in the auto segment given the easing of chip shortages and post monsoon pick-up in infrastructure projects.

Estimates cut on conservative basis

Estimates cut on conservative basis

The brokerage estimates, "We now assume FY23/FY24 EBITDA/t of Rs 15.4k/Rs 16.9k for standalone operations including BPSL. With the ability to earn a premium via its integrated operations and strong B2C network, the company can deliver better margins than the US$ 200/t possible for the Indian industry, assuming China's gross margin settles at US$ 250, a 10Y historical average. The stock is currently discounting EBITDA/t of Rs 12.7k-13.7k based on 5Y/10Y multiples."

Brokerage Maintain BUY for a target price of Rs 140 apiece

Brokerage Maintain BUY for a target price of Rs 140 apiece

The brokerage said, "We cut our FY23/FY24 EBITDA estimates for TATA by 16%/5% and lower our target 1Y forward EV/EBITDA multiple to 5.5x (from 6.0x) to reflect global economic uncertainty. Our Target Price thus reduces to Rs 140 (from Rs 170). We maintain our rating at BUY given the company's healthy growth and margin profile. TATA is trading at 4.5x FY24E EV/EBITDA compared to its 5Y/10Y mean of 5.5x/5.7x."

Disclaimer

The stock has been picked from the brokerage report of BOB Capital Markets Ltd . Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.

Story first published: Saturday, August 6, 2022, 11:29 [IST]
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