Share of Tata Steel has rallied 268 per cent returns to its shareholders in the last 12 months. The share stood at Rs 308.25 on June 17, 2020. It has zoomed to Rs 1,133.75 today, translating into gains of 268 per cent during the period. In comparison, Sensex rose 56 per cent in one year.
Rs 5 lakh invested in the steelmaking arm of Tata group a year ago would have turned into Rs 18.39 lakh today.
The stock has gained 76 per cent since the beginning of this year. It opened 0.26 per cent higher at Rs 1,119.95 against the previous close of Rs 1,117.15 on BSE.
"Tata Steel has witnessed a very good rally in the past one year on the back of stronger steel prices globally which has resulted in having higher realisations and profits for steel companies across the globe. Many companies are using this bull run in steel to deleverage the balance sheets which is evident from the fact that the consolidated net debt for Tata steel has declined by 28% as of March 21 and it is ahead of schedule in terms of its debt repayment," Jitesh Ranawat, Head Institutional Sales at Marwadi Shares and Finance Ltd, told Business Today.
"We expect the company to merge Tata BSL (formerly Bhushan Steel) with itself and also accelerate its CAPEX program in Kalinga Nagar which will give a fillip to its capacities in India, which had the highest EBITDA last quarter," he noted.
"Watch out for the movement of steel prices as any major correction in those prices will allow investing into Tata Steel on dips as the stock has factored in lots of good news so far," he added.
Jefferies has maintained a 'Buy' call on the stock with a target price at Rs 1,500 per share. The brokerage also mentioned that the FY21 annual report shows a rising focus on sustainability and sets out specific targets for 2025 and 2030.
CLSA too has a 'Buy' call on the stock with a target price at Rs 1,362 per share. It mentioned that rising carbon costs are a medium-term risk but Europe should self-sufficient in cashflows in the near term.
Indian steel major reported a standalone net profit of Rs 13,606.62 crore for FY21, more than twice recorded in the previous fiscal. The company had posted a net profit of Rs 6,743.80 crore in FY20, translating into a 101 per cent growth.
Tata Steel has also repaid Rs 30,000 crore of net debt in the last financial year.
In quarterly terms, Tata Steel reported a standalone net profit of Rs 6,593.54 crore in Q4 FY21 as opposed to a loss of Rs 436.83 crore in Q4 FY20. The company recorded its highest-ever quarterly crude steel production at 4.75 million tonnes during the quarter, while steel deliveries grew to 4.67 million tonnes.
"All our segments, especially automotive, have performed extremely well due to our continuous focus on building strong customer relationships, superior distribution network, brands, and new product developments. We are also making good progress on our various initiatives to de-risk the business while our digital marketing platforms are helping us reach new markets and be future-ready," said Tata Steel CEO TV Narendran.
The company is turning around its acquired subsidiaries as well. For instance, Tata Steel BSL (formerly Bhushan Steel) recently posted a manifold jump in its consolidated net profit at Rs 1,913.73 crore for the fourth quarter ended March 31, 2021, mainly on the account of higher income.
Tata Steel acquired Bhushan Steel in 2018 through the insolvency resolution process.
Recently, the company announced that it will continue to pay monthly salaries to the families of all employees who have passed away due to coronavirus.
In a statement issued on May 23, the Jamshedpur-based steel manufacturer mentioned that the firm will continue to pay these salaries till the retirement age of the deceased, which is 60 years.
Also, Tata Steel will be included in the 30-share BSE Sensex index after a gap of six months, replacing Oil and Natural Gas Corporation (ONGC) from 21 June.