Tata Steel: Invest Now?

Tata Steel is a global steel company with an annual crude steel capacity of approximately 35 million tons per annum. The company is primarily engaged in the manufacturing and distribution of steel products across the globe. Tata Steel's shares were trading flat at Rs 125.50 in October 2023, against the previous close of Rs 128.85 on BSE. The stock has delivered multi-bagger returns of 228% in the last three years. However, it has lost 4.65% in the last two years, leaving investors guessing about its outlook. The relative strength index (RSI) of Tata Steel stands at 46.6, indicating it is neither trading in the overbought nor in the oversold territory.

In terms of analyst recommendations, Incred Equities has a reduce call on the stock with a target price of Rs 70, while ICICI Securities has an add call with a target price of Rs 150. Pravesh Gour, Senior Technical Analyst at Swastika Investmart, suggests holding the stock for a target price of Rs 142, while Vaishali Parekh, Vice President of Technical Research at Prabhudas Lilladher, expects the stock to hit Rs 150.

Tata Steel has a presence across the entire value chain of steel manufacturing, from mining and processing iron ore and coal to producing and distributing finished products. The company offers a broad range of steel products, including hot rolled, cold rolled, coated steel, rebars, wire rods, tubes and wires. It has performed well financially over the past ten years, indicating a somewhat good track record.

Overall, Tata Steel appears to be a somewhat overvalued stock with a strong price trend, suggesting that its price is likely to rise in the short term. However, investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.

Tata Steel's performance and future prospects

Tata Steel Ltd. is a public limited company incorporated in India and is Asia's first integrated private steel company, established in 1907. It is listed on the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE). The company has a presence across the entire value chain of steel manufacturing, from mining and processing iron ore and coal to producing and distributing finished products.

Performance

Tata Steel's share price was Rs 174.71 as of 5 July 2024, a decrease of 0.90% from the previous close of Rs 176.29. The 52-week high of the share price was Rs 184.60, and the 52-week low was Rs 111.25. The company has spent 3.28% of its operating revenues on interest expenses and 10.69% on employee costs in the year ending 31 March 2024. The company has reported a net profit after tax of Rs 517.56 Crore in the latest quarter. The company's market cap is Rs 2,18,100 Cr.

Future Prospects

Tata Steel has performed well in some of the past ten years, indicating a somewhat good financial track record. The company's sales growth has been healthy at 28.76% in the last three years. However, Return on Equity has declined to 3.30% compared to the last three years' average. Sales growth in the last four quarters has been -2.05%.

Tata Steel's share price is expected to rise in the short term, but investors should also check the ratings on Quality and Valuation before investing. The company's financial performance is expected to improve due to the global fiscal stimulus supporting infrastructure projects and the rebound in coking coal prices. The impact of COVID-19 on the steel industry has been relatively mild due to resurgent demand in China and a better-than-expected post-lockdown recovery globally in the second half of 2020.

Tata Steel has received numerous awards and recognitions over the years, including the prestigious Deming Grand Prize in 2012, the Dun & Bradstreet Corporate Award in 2019, and the Worldsteel's Steelie Award in 2020.

Tata Steel's share price and market cap

Tata Steel Share Price and Market Cap

As of July 11, 2024, Tata Steel is trading at 169.00 Indian rupees, 0.60% higher than the previous day's closing price of 168.00. The company has given 20.33% returns this year and -4.76% in the last five days. The 52-week high for Tata Steel is 184.60, while the 52-week low is 111.60.

Tata Steel has a market capitalization of 210,774.22 crore Indian rupees (approximately 2,10,871 crore) as of July 11, 2024. The company is ranked 44th in market cap size.

The stock price of Tata Steel has seen some volatility, with a moderate risk level that is 2.20 times as volatile as Nifty. The company's market share has decreased from 29.75% to 29.47% over the last five years.

Tata Steel's revenue has grown at a yearly rate of 7.7% over the last five years, compared to an industry average of 10.05%. The company's net profit in its last quarter was 611.48 crores, while it reported a net profit of -4437.44 crores in 2024.

Analysts' recommendations on Tata Steel stock vary, with some suggesting a 'strong buy', while others rating it as a 'buy', 'hold', 'sell', or 'strong sell'. Investors should conduct their own research and consult with a financial advisor before making any investment decisions.

Tata Steel's valuation and whether it is a good buy now

Tata Steel Limited is a global steel company based in India with an annual crude steel capacity of approximately 35 million tons per annum. The company is engaged in the manufacturing and distribution of steel products and has a presence across the entire value chain of steel manufacturing, from mining and processing iron ore and coal to producing and distributing finished products.

In terms of valuation, as of May 2024, Tata Steel's share price was ₹173.30, with a P/E ratio of 49.29 and a P/B ratio of 1.66. The company's 52-week high was ₹175.2, and its 52-week low was ₹104.3. The market cap of Tata Steel as of May 2024 was ₹2,17,586.6.

Analysing the financial track record of Tata Steel, Moneyworks4me indicates that the company is an average-quality company. In terms of valuation, Tata Steel seems to be somewhat overvalued compared to its past performance. However, the Price Trend analysis by MoneyWorks4Me indicates a strong trend, suggesting that the price of Tata Steel is likely to rise in the short term.

According to technical analysts and brokerages, the outlook for Tata Steel stock varies. Some suggest a reduce call with a target price of ₹70, citing concerns about high inflation and rising interest rates leading to steel demand destruction. Others have a more positive outlook, with target prices ranging from ₹142 to ₹150, based on technical analysis and the company's short-term trading performance.

Tata Steel has delivered multi-bagger returns of 228% in the last three years, but the stock has lost 4.65% in the last two years, leaving investors uncertain about its future outlook. The relative strength index (RSI) of Tata Steel stands at 46.6, indicating that it is neither trading in the overbought nor the oversold territory.

In summary, while Tata Steel has delivered strong returns in the past three years and is expected to benefit from its presence across the steel manufacturing value chain, the stock's performance in the last two years and the uncertain economic environment have left investors cautious. Whether to invest in Tata Steel depends on one's risk appetite and investment horizon. It is always recommended to consult with a qualified financial advisor before making any investment decisions.

Tata Steel's presence across the value chain of steel manufacturing

Tata Steel has a presence across the entire value chain of steel manufacturing, from mining and processing iron ore and coal to producing and distributing finished products. The company's product mix includes flat products such as hot rolled coils, cold rolled coils, galvanised steel, and long products such as wire rods, rebar, ferro alloys, tubes, bearings, and wires.

Tata Steel's major manufacturing locations are in the eastern part of India, in the states of Jharkhand and Odisha, while its Profit Centres, such as the Wires Division, and customer delivery points are located across India. The company has steel processing centres and stockyards at strategic locations across the country to optimise delivery time and cost. Its captive iron ore mines and collieries are located at sites around Jamshedpur and Kalinganagar.

Tata Steel has a Pan-India retailer reach and a network of service partners in key consumption centres, providing a unique competitive advantage to the TSL market. The company has 150 sales officers in 26 locations, 193 distributors, 1,500 distributor outlets, 11,883 dealers, and a strong network reaching around 650 districts (95% coverage).

The company has a target to increase its domestic steelmaking capacity to 30 MnTPA by 2025.

Tata Steel's financial performance and technical indicators

Tata Steel's financial performance has been strong, with the company reporting growth in net profit and increasing profit margins. However, there are also some weaknesses, such as negative breakdowns and decreasing shareholdings by promoters. Technical indicators for Tata Steel are currently showing a strong buy signal, with moving averages, oscillators, and pivots all suggesting potential profitable trades.

The Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) are two key technical indicators that traders frequently use to analyse securities. The RSI calculates a security's momentum and velocity of price movements, and it can be used to identify overbought or oversold conditions in the market. The MACD, on the other hand, is a trend-following momentum indicator that shows the relationship between two moving averages of a security's price. It helps traders identify trends and can be useful for identifying buy and sell signals.

Tata Steel's share price has been on an upward trend, and the company has released several earnings press releases for the quarters ended March 31, 2024, December 31, 2023, September 30, 2023, and June 30, 2023. The company's share price is currently 5.16% away from its 52-week high, and it has a VERY BULLISH trend according to recent analysis.

In summary, Tata Steel's financial performance shows growth in net profit, and technical indicators suggest a strong buy signal. However, it is important to note that market conditions can change rapidly, and investors should always conduct thorough research and due diligence before making any investment decisions.

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