NRI Business Associate
Tata Steel 4QFY21 Margins were at a record high and management confirmed further sequential expansion in coming quarters based on spot spreads.
Tata Steel
- 4QFY21 Margins were at a record high and management confirmed further sequential expansion in coming quarters based on spot spreads. We estimate steel margins to peak in 1QFY22E and moderate to sustainable levels from 2HFY22E but see upside risk.
- With contained capex, strong margins and tight control on working capital, Tata Steel has reduced net debt to Rs.82,500 cr (-21% yoy) as on Mar’21. We estimate net debt to reduce further and net debt/EBITDA to reduce to 1.1x/1.3x in FY22/23E.
- Strong domestic/export prices and improved product mix should result in at least a Rs.6,000-7,000/ton sequential increase in realization in 1QFY22 as per management. For Europe, spreads are likely to be much higher than 4QFY21 averages led by sharp price hikes across regions.
- Management shared that they can reach 40 mtpa steel capacity in India from current 18 mtpa through brownfield expansions: Jamshedpur -14 mtpa (from 10 mtpa), KPO -16 mtpa (from 3 mtpa) and Angul (Tata BSL) – 10 mtpa (from 5 mtpa).
- We value India-6.5x, Europe-4x and South East Asia-4x on Mar’23E EBITDA & arrive at a fair value of Rs1,400. (EBITDA: Earnings Before Interest, Tax, Depreciation and Amortization).
Tata Steel: BUY
Dated: 14 th June 2021
CMP: Rs.1158
Fair Value: Rs.1400
Potential Upside: 20.9%
Market Cap: Rs.1,39,852 Cr
Time Frame: 12 months
Note:
The above is a brief note on the company, based on the inputs of KIE research report dated 7
th
May 2021, which is available on their website at:
https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental
.
Disclaimer:
http://bit.ly/2n5AxIE
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please refer the Risk Disclosure Document issued by SEBI and go through the Rights and Obligations and Do's and Dont's issued by Stock Exchanges and Depositories before trading on the Stock Exchanges .
OPEN YOUR ACCOUNT NOW !
Authorised Person
Lakshit Financial is Authorized Person of Kotak Securities Limited in cash segments of BSE & NSE and NSE F&O segments with NSE. Lakshit Financial registration number: BSE CASH AP0106730124228 | NSE CASH AP029177621 | NSE F&O AP029177621. Lakshit Financial Registered Office: ASM 7, Ashwin Sector, Mumbai Agra Highway, CIDCO, Nasik 422009, Maharashtra, India. Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. SEBI Registration No. INZ000200137 (Member of NSE, BSE, MSE, MCX & NCDEX). Member Id: NSE-08081; BSE-673; MSE-1024; MCX-56285; NCDEX-1262. AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-NSDL-23-97.
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please refer the Risk Disclosure Document issued by SEBI and go through the Rights and Obligations and Do's and Dont's issued by Stock Exchanges and Depositories before trading on the Stock Exchanges.
Charges for Other Services | Disclaimer | Privacy & Security | BSE | NSE | SEBI | SCORES | Anti Money Laundering Measures | Important Policies | Dos & Donts | Advisory for investors