Tata Steel shares surge on these two key triggers ahead of split; Q1 result this week

Tata Steel shares gained around 2 per cent on Monday morning to join the top gainers Nifty50 list. The share price of the steel major jumped 2 per cent to Rs 954.9 apiece on the BSE intraday during the morning session. 

The surge in Tata Steel price was mainly due to two important triggers – stock split and quarterly earnings. 

The board of Tata Steel had on May 3 considered a proposal to split the stock in the 1:10 ratio, which means that every shareholder will get 10 shares for every single holding. It has fixed July 29, 2022, as the record date to determine shareholders’ eligibility for shares split having a face value Rs 10 each. 

The company is also scheduled to release its June-end quarter results for the financial year 2022-23 (Q1FY23) this week. Brokerages expect mute earnings for the steel major during the quarter amid a steep fall in steel prices. 

The profit is expected to slump up to 35 per cent year-on-year (YoY) during the quarter, while revenues may grow in double-digit up to 15 per cent Q1FY23. 

According to Equirus Securities, Tata Steel India deliveries declined by 2.2 per cent YoY to 4.06mt and expects standalone realisations to increase by 4.2 per cent sequentially due to higher domestic steel prices in April-May 2022 against Q4FY22. 

Renegotiation in auto contracts while EBITDA/t to decline by 19.6 per cent sequentially due to higher coal and power and other costs, the brokerage said. 

We expect EBITDA/t to decline to US$210/t due to negative operating leverage and higher raw material prices which should be partially offset by higher realisations on account of renegotiated contracts and higher spot prices, Equirus Securities also stated. 

After paying off the NINL acquisition cost of Rs 12.1 billion, the management commentary on debt is important, Motilal Oswal said, adding that the brokerage awaits details on a revival of NINL and timelines for the commissioning of the Kalinganagar expansion program. 

It expects company to report a strong EBITDA (+USD264/t), riding the strong tailwind of steel pricing. While the management commentary on coking coal costs going forward, export mix, and automotive contracts is crucial, Motilal Oswal added.