Even as Tata Steel shares trading at 14-month low, is it time to buy it? Experts suggest this

Tata Steel shares are trading at a 14-month low and many brokerages have revised their targets on this stock, downwards. Zee Business Research Analyst Ashish Chaturvedi brings this research on the prospects of this stock and an expert view on what to do with it?

Chaturvedi said that at current levels, Tata Steel stock has corrected by 45 per cent from its all-time high.  In one month, the correction has been to the tune of 21 per cent. Global issues and recession are the main reasons and those have led to problems in the whole commodity market, he reasoned.  

He assessed that the reason for this drop is closely linked to global recessionary risks and long standing problems in the commodity market.

The valuations of this stock are at their historic lows. The price-to-book (PB) value for Tata steel is currently at 0.7 times and it has never gone down below half times. The brokerage firm now sees a valuation comfort in this stock.

It cited instances on 2009, 2014 and 2020 when the Coronavirus pandemic hit the world. At no instance did the PB ratio breached down the 0.5 times mark. In fact buying is seen in it when the valuation is around this level.  

He further said that during a commodity bull run between 2004 and 2008, the PB ratio went up at 1.4 times. There is a significant correction now from the above levels.  

Chaturvedi said that a common point being highlighted by many brokerages is the strength in its balance sheet which has never been so strong. The company has reduced its debt significantly, he added.  

Apart from that, it has also registered 40,000 crore profit for FY2021-22. In FY22, the debt has come down to 75000 cr from 88000 cr in FY21 and 1.16 lakh cr in FY20.

The stock is still giving a dividend yield of 6 per cent.

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While brokerages have reduced their targets, they maintain a buy rating in this stock. Citi has revised its target from Rs 1800 to Rs 1085 while JP Morgan has cut it from Rs 1940 to Rs 1400.  

Commenting on the stock, market analyst Sandeep Jain said that he remains cautious on commodity stocks as in the last year all have seen a boom.

He also added that, even though it is going strong in recent times, it would be important to see whether it will be able to maintain the profits. He said that he will not recommend investors to buy it under current circumstances.