Tata Steel's Stock Price Rises Despite Unexpected Q2 Loss

Tata Steel's stock price showed a 0.94% uptick, reaching Rs 117.70, one day after the company announced an unexpected net loss of Rs 6,196 crore on a consolidated basis for the second quarter of FY24, falling short of street estimates. This setback was primarily attributed to the lackluster performance of its European operations. In contrast, the steel giant had reported a net profit of Rs 1,514.42 crore in the same period the previous year. During the quarter under review, Tata Steel's consolidated revenue witnessed a 7% decline, dropping to Rs 55,682 crore from the previous year's figure of Rs 59,878 crore.

Tata Steel's stock performance over the past year has been a mixed bag. The stock experienced a 3% decrease in the last five days and an 8.59% decline over the last month. However, it has offered returns of 6% in the past six months and a noteworthy 15% increase in the last year for its investors.

Regarding the outlook for Tata Steel shares, Prabhudas Lilladher recommends a "Buy" with a target price of Rs 144. They note that Tata Steel's 2QFY24 consolidated EBITDA declined by 30% year-on-year to Rs 4270 crore (an 18% decline quarter-on-quarter), primarily due to the weak performance of its European operations. On the other hand, the Indian business segment displayed robust operating performance, with EBITDA growth of 45% year-on-year, reaching Rs 6750 crore. The costs per ton related to raw materials decreased by 3% quarter-on-quarter to Rs 30,300/t, while other expenses dropped by 12% quarter-on-quarter to Rs 20,945/t, attributed to lower royalty, foreign exchange impacts, and reduced power costs. Prabhudas Lilladher suggests keeping an eye on capex execution, as weak pricing in Europe may continue to pose challenges for Tata Steel. Their target price for the stock is Rs 144, with the current market price (CMP) at Rs 116.

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