Tata Steel share price: What to do with Tata group stock after steelmaker's better-than-estimated Q4 results

Tata Steel shares gave up initial gains amid choppy trade on Wednesday, a day after the Tata group IT giant reported a better-than-expected set of financial results for the quarter ended March 2023. The stock of Tata Steel — one of the largest steelmakers in the country — gained by as much as Re 0.75 or 0.7 per cent at Rs 111.1 apiece in early trade on BSE.

Brokerages held on to largely positive views on the company after the release of its Q4 results, with targets set as high as Rs 150 apiece, translating to an upside of 36 per cent from Tuesday's closing price. 

Tata Steel Q4 results: A summary

After market hours on Tuesday, Tata Steel reported an 83 per cent year-on-year fall in net profit to Rs 1,693 crore for the final quarter of the financial year 2022-23, much better than Steet estimates. Its revenue contracted nine per cent to Rs 62,962 crore compared with the corresponding period a year ago — also better than analysts' expectations, according to a regulatory filing. 

According to Zee Business research, Tata Steel's quarterly net profit was estimated at Rs 288 crore on the back of revenue of Rs 59,418 crore.

The steel manufacturer's margin shrank by 10.2 percentage points though remained in double-digit percentage points.

Tata Steel's margin  — a key measure of a company's profitability — came in at 11.5 per cent as against 21.7 per cent a year ago. 

The company's earnings before interest, taxes, depreciation and ammortisation (EBITDA) per tonne — a key metric determining the amount of money a steelmaker generates by each tonne of the alloy it produces — stood much better than estimates. 

Its EBITDA per tonne fell 30.7 per cent to Rs 16,160 crore. Zee Business analysts had estimated the company's EBITDA per tonne for the three-month period at Rs 13,107. 

The company managed to reduce its net debt by Rs 3,900 crore, to Rs 67,810 crore.  

Analysts say it remains unclear whether adequate support to the company's decarbonisation strategy would be agreed basis its discussions with the UK government. 

Tata Steel has sought a financial package to the tune of 1.5 billion pounds from the UK to support its decarbonisation plans.

Tata Steel dividend

Tata Steel's board recommended a dividend of Rs 3.6 per share.  

What brokerages make of Tata Steel Q4 earnings

Here's how some of the top brokerages rate Tata Steel after the Tata group steel major's announcements: 

Morgan Stanley, which maintained its 'equal-weight' rating on the steel company with a target price of Rs 110, said Tata Steel's EBITDA came in much stronger than its estimates driven by better realisations and lower operating expenditure. 

According to the brokerage, Tata Steel's European business, however, continues to struggle and emerged a big drag on the company in the January-March period.  

Catch latest stock market updates here. For all other news related to business, politics, tech, sports and auto, visit Zeebiz.com.