Tata Steel shares rise 7% since stock split: How long for Rs 150 mark?

Shares of Tata Steel have risen nearly 7 per cent since the stock was split in the ratio of 1:10 on July 28.  Tata Steel stock hit an intraday high of Rs 107.85 today against the previous close of Rs 106.55 on BSE. Earlier, it opened higher at Rs 106.85 against the previous close of Rs 106.55. Market cap of the firm stood at Rs 1.29 lakh crore today.

Shares of Tata Steel have lost 23 per cent in a year and declined 3.64 per cent in 2022. However, the stock has gained 11.46 per cent in a month. Total 33.13 lakh shares of Tata Steel changed hands amounting to a turnover of Rs 35.66 crore on BSE.

The Tata Steel share, which is one of the top picks of the brokerages in the steel sector, has gained 30.39 per cent from its 52-week low in nearly two months. On June 23, 2022, the large cap stock fell to a yearly low of Rs 82.71 on BSE. Tata Steel shares hit a 52-week high of Rs 147.67 on September 14, 2021.  

Q1 earnings  

Tata Steel logged a consolidated net profit of Rs 7,714 crore in Q1 against Rs 9,768 crore in the corresponding quarter of FY22. The firm's India business saw net profit falling 36.5 per cent compared to the corresponding quarter of FY22. The net profit for India business dipped to Rs 5,783 crore in Q1FY23 against Rs 9,112 crore in Q1FY22.

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Shareholding Pattern

In Q1 of the current fiscal, 25,90,397 public shareholders held a 66.08 per cent stake or 22.43 lakh shares in the firm. 10 promoters held 33.92 per cent stake or 414.35 crore shares in the last quarter.

25.32 lakh public shareholders held 219.49 crore shares of the firm, amounting to a stake of 17.98 per cent with an individual share capital of up to Rs 2 lakh.

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450 public shareholders held 28.69 crore shares of the firm, amounting to a stake of 2.35 per cent with an individual share capital of over Rs 2 lakh. 71 mutual funds owned 105.09 crore shares or 8.60 per cent stake in the firm at the end of June quarter.

Steel sector outlook  

The outlook for the steel sector is not very encouraging, considering the fall in steel prices and shrinking demand for the metal. This does not augur well for steel stocks such as Tata Steel and JSW Steel.  

According to a report by Kotak Institutional Equities, steel prices and margins will remain under pressure in the future.  It has given a 'Reduce' call on the Tata Steel stock.

"Domestic steel prices are down 20 per cent in the past three months led by regional price weakness. Prices should remain under pressure given the current premium to import parity and any relief from export duty reduction will only have limited benefits. Consumption lag in raw materials suggests that steel margins will decline sharply in 2QFY23E. Margin recovery in 2HFY23E appears delusional based on spot spreads, as we see downside risks to prices and upside risks to costs. Amid the upcoming margin contraction and uncertain steel price outlook, we expect the steel stocks to remain under pressure."

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Credit Suisse has maintained an underperform rating on JSW Steel's stock while it has a neutral stance on Tata Steel. Credit Suisse, in its latest report, said it remains cautious on the Indian steel sector. The brokerage said future spreads are likely reverting to the historical average and that it sees a risk to regional prices with weak China property.

EXPERTS' TAKE

Business Today spoke to analysts about the time taken by Tata Steel stock to reach the Rs 150 mark. Here's what they said.  

Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking

"The stock has been witnessing buying demand in the last two months from the major support area after price wise correction in the last nine-ten months thus provides favourable risk reward set up. The stock is on the verge of generating a breakout from the falling channel containing entire decline since FY22. However and the rejection from the 200EMA is likely to react negatively for the stock. Weekly RSI too has a mirror reflection where the indicator failed to breach past the 9-10 months falling trend line. On the oscillators, the weekly MACD has recently generated a buy signal and is seen sustaining above its nine period average thus buy on dip should be the ideal approach. The stock need to be accumulated at lower levels of Rs 95-Rs 96 (coinciding with 50dma and 61.8% retracement of recent upmove) for an upside target of Rs 123 and beyond."

Pavitraa Shetty, Co-founder & Trainer, Tips2Trades

 "Weakening global economy with rumors of a recession fueled with increasing interest rates have led to metal stocks including Tata Steel remaining subdued and could stay bearish for a sustained period of time. Rs 103 is a strong support below which a fall till Rs 92 looks possible. Major & immediate resistance remains at  Rs 113."

Manoj Dalmia, founder and director, Proficient Equities  

"Tata Steel can continue its upward rally with the current levels, assuming the short-term levels to be Rs 113 .The target of Rs 150 doesn't look favourable at the moment due to global economic concerns such as recession in Europe, and other geopolitical conflicts and the cooling down of commodity prices which can easily affect the prices  and margins of this steel company. A long term price target is a wait-and-watch situation as the prices are indicating a lower low formation instead of a higher high."

Ravi Singh, vice President and head of Research, Share India

"On looking at overall scenario of the steel sector, Tata Steel may take around three years to reach the target of Rs 150 levels. Lower steel prices, higher volume and sluggish demand may impact the company's profitability in the short term. However, coking coal prices too have declined, so, margins could sustain if coking coal prices continue to fall. Tata Steel share price may touch the levels of Rs 120 - Rs 125 in short to medium term perspective."

Ravi Singhal, CEO, GCL

"As we can see, China is continuously lowering interest rates in order to stimulate its economy, while most other central banks are raising interest rates. This will assist metal prices in remaining neutral to positive. On the other hand, Europe's energy crisis may help metal prices rise even further. So there is a chance, Tata Steel can touch Rs 150 not very soon but in the long term."

Vinit Bolinjkat, Head of Research, Ventura Securities

"The company is working on simplification of its group structure by reducing its subsidiaries, associate companies, and joint ventures, especially in Europe. The company has brought down its legal entities from 300 in FY19 to 217 in FY22. 32 non-trading Tata Steel Europe Ltd subsidiaries are in voluntary liquidation (28 in UK and Ireland and 4 outside). The restructuring plan will help the company to enhance its operational efficiency. But fear of lower demand especially from China, global steel prices have been falling, which soared as a result of the Russia-Ukraine war. This will impact the profitability of the company in the near to mid-term which will create a hurdle for achieving a higher target per share."