1:2 Split, Rs 58.2 Dividend In 3 Yrs: Tata's Steel Stock Is Rs 8 Away From 1-Yr Low; Buy Ahead Of Q3 Results?

Tata Group-backed steelmaker giant, Tata Steel's share price traded under pressure in YTD performance, giving zero returns to investors. Tata Steel stock will be in focus ahead due to its Q3 results which are scheduled next week. In the third quarter, the company is expected to see improvement in volumes of both standalone and Europe steel business. However, currently, Tata Steel stock is nearly Rs 8 from its 1-year low.

Tata Steel Share Price:

In the pre-market trade of January 24th, TATA Steel shares were at Rs 130.40 apiece, marginally down on BSE. On the prior day, the stock was at Rs 130.40 apiece on BSE, with a market cap of Rs 1,62,784.09 crore. The January 23rd price level highlighted that Tata Steel stock is Rs 7.9 away from its 52-week low of Rs 122.60 apiece.

The heavyweight steel stock, also, has corrected significantly from its 52-week high of Rs 184.60 apiece. YTD, the stock is down by 5%.

Tata Steel Q3 Results Preview:

The company has announced that a meeting of the Board of Directors of Tata Steel Limited ('the Company') will be held on Monday, January 27, 2025, inter alia, to consider and take on record the audited Standalone and unaudited Consolidated Financial Results of the Company for the quarter and nine months ended December 31, 2024.

During Q2FY25, the company posted a net profit of Rs 833 crore, compared to a net loss of Rs 6,196 crore in Q2 of the previous fiscal. On the other hand, revenue dipped by 3% YoY to Rs 53,905 crore. EBITDA was at Rs 6,141 crore, while margins were at 11.4%.

In its preview note, Antique Stock Broking said, "Tata Steel's standalone volume at ~5.3 MT is expected to be 7.6% higher YoY aided by the volumes from Kalinganagar 5mpta expansion. While Europe's steel volume at 2.1 MT is expected to improve 7% YoY, we expect it to report an EBITDA loss of approx. INR 10.1 bn (as against an EBITDA loss of INR 28.7 bn in 3QFY24). Consolidated EBITDA is expected to decline 28% YoY to INR 44.9 bn due to lower EBITDA at Indian operations and forex losses partly offset by lower losses at Europe leading to a loss at the adjusted PAT level."

On a standalone basis, Kotak Institutional Equities expects standalone steel realizations to decrease by 4% QoQ (-14% yoy) on account of weak HRC prices. Also, the brokerage expects standalone volumes to increase by 8.6% yoy (+3.7% QoQ) to 5.3 mn tons. India EBITDA/ton to decrease by 6% QoQ (-32% yoy) to Rs11,400/ton mainly led by lower flat realisation.

On a consolidated basis, Kotak estimates Europe to report an EBITDA loss of US$51/ton (-US$75/ton in 2QFY25) led by weak prices in regional end markets.

BUY Tata Steel Share Price:

Kotak has recommended selling on Tata Steel for a target price of Rs 135.

However, as per Trendlyne data, the consensus recommendation from 30 analysts for Tata Steel Ltd. is BUY. EPS is expected to grow by 233.4% in FY25. The 1-year average target price on Tata Steel was at Rs 159.73 apiece, hinting at nearly 22.5% potential upside ahead.

Tata Steel has given a hefty dividend since its split for the first time in 2022.

Stock Split: The stock split for the first time in July 2022, in the ratio of 1:10, where its face value was adjusted from Rs 10 to Rs 1.

Dividends: The company has delivered three final dividends since its first split. The highest dividend payout was Rs 51 per share in 2022, while Tata Steel delivered Rs 3.60 per share dividend each in 2023 and 2024. Since May 2001, the company has paid up to 30 dividends, as per Trendlyne data. The company has a dividend yield of 2.85% at present.

Tata Steel is a leading global steel manufacturer. It operates in more than 26 countries, with key operations in India, the Netherlands and the UK. The company serves customers in the automotive, construction, engineering, energy and power sectors.