Tata Steel Q3 earnings beat estimates; stock up as analysts remain optimistic
Tata Steel's Q3 profit beats estimates at Rs 295 crore despite a global slowdown. Stock gains on strong domestic demand, higher volumes, and reduced net debt, say analysts.
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Tata Steel delivered a better-than-expected performance in Q3 FY24 despite industry challenges such as cheap Chinese imports and declining global steel prices. The stock traded at Rs 126.81 on the NSE, up 0.35 per cent as of 10:03 AM.
Q3 earnings overview
The company reported a consolidated net profit of Rs 295 crore, down 43 per cent year-on-year but ahead of analysts' estimates. Revenue for the October-December quarter stood at Rs 53,648 crore, reflecting a 3 per cent drop year-on-year. Despite flat or declining steel prices, higher volumes helped mitigate some of the impact.
Tata Steel's India operations delivered 5.29 million tonnes in sales volumes during Q3, an 8 per cent increase year-on-year and 4 per cent growth sequentially. The company attributed the rise to robust domestic demand and a stronger export presence.
Key factors driving the stock
Brokerages remain bullish on Tata Steel. JPMorgan reaffirmed its 'overweight' rating with a target price of Rs 155, citing strong EBITDA driven by lower-than-expected costs and net debt reduction as key positives. The brokerage highlighted that better-than-expected average selling prices in India and the US markets contributed to the earnings surprise.
Morgan Stanley echoed a positive outlook, maintaining an 'equal-weight' rating with a target price of Rs 160. The firm praised the company's domestic business performance, noting steady profitability in the UK and Netherlands operations.
Challenges and opportunities
The steel industry faced pressure from cheap imports from China, Vietnam, and South Korea, leading to reduced realizations. However, Tata Steel managed to navigate these challenges with increased domestic demand and strategic export initiatives.
Looking forward, analysts advise monitoring raw material costs and profitability from the European business, which will play a crucial role in sustaining growth.
Outlook
With steady domestic sales, strategic global operations, and reduced net debt, Tata Steel appears well-positioned to tackle industry headwinds. Analysts suggest accumulating the stock at current levels, given its fair valuations and improving market conditions.
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10:46 AM IST