Tata Steel Q4FY21: What should be the investment strategy now?

Shares of Tata Steel hit 52-week high of Rs 1,129 in Thursday’s session after the company posted a consolidated net profit of Rs 7,161.91 crore for the quarter ended March 2021, mainly on account of higher income. The company had reported a net loss of Rs 1,615.35 crore in the year-ago quarter.

In Q4FY21 Tata Steel achieved the highest ever quarterly crude steel production of 4.75 mn tons from India operations this saw company’s total income jumping to Rs 50,249.59 crore from Rs 37,322.68 crore earlier.

On the operational front also, the company managed to achieve the highest ever quarterly EBITDA of Rs.12,295 crores with 40% QoQ and 2.7x YoY growth in Q4FY21. This translates into an EBITDA per ton of Rs 26,309 and an EBITDA margin of 40.9%. FY21 EBITDA was Rs.28,587 crores.

Here are brokerage views on the company’s stellar performance.

CLSA | Target Price: Rs 1,150

The Q4 consolidated EBITDA was 11% above estimate, while debt reduction remained strong. Most businesses performed better than estimates. It reported the best-ever standalone profitability & Q1 likely to be even stronger.

Europe business was largely in line, while clarity is awaited on several issues. The deleveraging is on track with the focus now shifting to expansion projects.

JPMorgan | Rating: Overweight | Target: Rs 1,250

The company reported a massive beat in Q4 with consolidated EBITDA at Rs 14,180 crore versus the consensus of Rs 12,800 crore.

H1FY22 should be very strong and a dividend of Rs 25 per share is an all-time high.

Investec | Target Price: Rs 1,175

The best is ahead as it’s a preferred ferrous proxy. The operational beat was across regions. The strong cash flow generation aids balance sheet deleveraging.

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