Tata Steel Q2 earnings beat estimates, can the stock reach fresh highs?

Shares of Tata Steel are in news since the Tata Group firm announced a stellar set of earnings. The Q2 earnings beat 
estimates on Dalal Street. Shares of Tata Steel fell in early deals on Friday. The stock fell 0.46% to Rs 150.20 on BSE. Market cap of the firm slipped to Rs 1.87 lakh crore. Total 8.37 lakh shares changed hands amounting to a turnover of Rs 12.61 crore on BSE.

Tata Steel stock has a one-year beta of 1.5, signaling high volatility during the period. In terms of technicals, the relative strength index (RSI) of Tata Steel stood at 46.4, signaling it's trading neither in the overbought nor in the oversold zone.

The Tata Group stock is trading lower than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day but higher than the 10 day moving averages. 

Tata Steel shares rose to a record high of Rs 184.60 on June 18, 2024 and fell to a 52 week low of Rs 118.80 on November 10, 2023. Tata Steel shares have rallied 26.3% in a year and risen 41.02% in two years.
 
Here's a look at what brokerages said on the prospects of the metal stock. 

Nuvama 

"We reckon Q3FY25 EBITDA/t shall be lower by Rs 1,000 per tonne due to lower steel prices, partly offset by lower coal prices. We are reducing FY25E/26E EBITDA by 30%/7% to factor in lower steel prices and higher loss in Europe. A partial rollover to FY27E yields a price target of Rs 150 (earlier Rs 165); maintain ‘HOLD’; prefer to enter Tata Steel at a lower price," said Nuvama . 

Motilal Oswal 

"Though there are near-term challenges related to high imports and lower realizations, the long-term outlook remains strong for TATA. While India business is expected to continue its strong performance, improving performance in Europe business would support overall earnings. We have reduced our revenue/EBITDA estimates for FY25 by 3%/2% and largely retained our estimates for FY26/FY27. TATA is trading at 7.2x FY26E EV/EBITDA and 2.0x FY26E P/B. Reiterate Neutral with an SOTP-based target price of Rs 160," said brokerage. 

YES Securities 

With steel prices anticipated to have bottomed out and China’s stimulus measures expected to benefit the steel sector and likely boost steel prices, the brokerage expects an improvement in steel spreads from the lows seen during H1FY25. It sees Revenue/EBITDA growth for Tata Steel at a CAGR of 8%/26%, over FY25-27E. It values Tata Steel on a SOTP basis to arrive at revised target price of Rs 157/share. 

JP Morgan

JP Morgan maintained its over-weight rating on Tata Steel, with a price target of Rs 180 per share.

This implies an upside of around 17 percent from the previous session's closing price. According to the brokerage, there are no negatives in the earnings print and the stock is likely to react positively to the headline beat on the consensus numbers.

The brokerage said management's commentary on debt reduction will be important.

Morgan Stanley

Global brokerage kept its equal-weight rating intact, seeing a price target of around Rs 175 per share. The brokerage noted that Tata Steel's consolidated EBITDA was Rs 6,140 crore, which clocked in 38 percent higher that its estimates.

The brokerage said UK and Netherlands business were slightly weak but others did better. The key thing to watch out was management guidance on domestic and International business demand and spreads trajectory for Q2.