Citi Brokerage downgraded the share price of this Tata Group company, which is the world’s tenth-largest steel producer, by 15 percent from Rs 140 to Rs 100.
With a market capitalization of Rs 1,43,480 crore. On Friday, Tata Steel Ltd shares closed at Rs 117.35 per share, down 0.59 percent from the previous close price of Rs 118.10.
In the last six months, Tata Steel’s share price has increased by 5 percent and 12 percent in a year.
The company’s revenue declined by 7 percent year on year, from Rs 59,877 crore in Q2FY23 to Rs 55,681 crore in Q2FY24. During the same period, net profit decreased from a profit of Rs 1,195 crore to a loss of Rs 6,614 crore.
Citi has downgraded the share price of Tata Steel from Rs 140 to Rs 100 implying a potential downside of 15 percent from the closing price on Thursday.
The rationale behind providing such a bearish call is
● CITI reported that India steel prices could have downside risks if China prices do not rise as the premium to import parity is less than 10%.
● CITI stated that, despite concerns about Europe spreads and leverage, Tata Steel expects the Netherlands to turn EBITDA positive in the fourth quarter (4Q) after a $113 per tonne loss in the second quarter as blast furnace BF relining is completed.
● Brokerage reported that Europe steel prices have contracted to $650 per tonne against the FY23 average of $790 per tonne.
In the latest shareholding pattern, company promoters hold a 33.9 percent stake, Foreign Institutional Investors hold 20.31 percent and retail investors hold a 22.71 percent stake in the company.
Tata Steel Ltd is a well-diversified company. The company is present throughout the steel manufacturing value chain, from mining and processing iron ore and coal to producing and distributing finished products.
Written by Omkar Chitnis
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