This Tata Group Stock Will Declare Stock Split, Should You Buy The Stock Now?

Over the longer-term we have noticed that there is a tendency for stocks to climb, once a stock split is announced. So, from a long-term holding of 2-3 years, you could benefit post a stock split.

Tata Steel to announce stock split: Should you buy the shares ahead of stock split?

For the stock to gain momentum, one would also have to see the stock split ratio that is being declared by the company. If the stock is split to a face value of Re 1 as against the face value of Rs 10, we could see the stock dropping to the Rs 127 to Rs 130 levels in line with the stock split. Our take and belief is that the stock could be split to a face value of Rs 2, which should make the stock trade around that Rs 250 to Rs 260 mark. The other option for the board is to split the stock to a face value of Re 5, where in the stock would trade at Rs 600 to 650 post the stock split. S tock split of face value of Rs 2 or Rs 5 looks more likely by the board of Tata Steel.

There is likely to be some upward movement once the stock is split, as the stock could become more affordable for retail investors. Over the longer term they do tend to move higher. Apart from this the company is a good profit making, dividend paying company.

Tata Steel Q4 results: higher coking coal to impact

It's a time in the metal space where prices have surged and metal companies have been having a good period, led by strong demand and rising prices Having said that input costs have also been rising on the back of rising coking coal costs.

While Tata Steel is slated to declare its results on May 3, ICICI Direct for Q4FY22E, expects the company standalone operations to report an EBITDA/tonne of Rs 25500 per tonne (compared to an EBITDA/tonne of Rs 28631per tonne in Q3FY22).

"Higher coking coal costs are likely to increase operating costs during Q4FY22E thereby resulting in a sequential decline in EBITDA/tonne. For Q4FY22E, Tata Steel's standalone operations is expected to report steel sales volume of 5.0 million tonne (MT), up 17% quarter on quarter," the brokerage has said.

Decent performance from European operations

According to ICICI Direct, while European operation steel sales are likely to come in at 2.36 MT, up 9% QoQ.

"For Q4FY22E, we expect European operations to report an EBITDA/tonne of US$200/tonne (EBITDA/tonne of US$182/tonne in Q3FY22). For Q4FY22E, on a consolidated basis, the topline is expected to increase 35% YoY and 11% QoQ to | 67710 crore. Consolidated EBITDA for Q4FY22E is expected to increase 17% YoY and 5% QoQ to Rs 16632 crore. Consolidated EBITDA margins for Q4FY22E are likely to come in at 24.6% compared to 26.1% in Q3FY22," the brokerage has said.

All in all, we believe that the stock split would make the shares affordable, while generating long-term returns. So, one can buy the stock of Tata Steel ahead of the stock split.