- Tata Steel Ltd. seems to have just about everything in it ahead of the quarterly earnings report.
A ratings upgrade by S&P Global Ratings this week - its second in 2021 - is burnishing the appeal of the stock which had already surged on the back of a global commodity boom and the firm's aggressive debt-reduction efforts. Up 117% this year, Tata Steel is the top performer of the benchmark NSE Nifty 50 index of India, and on course for its biggest annual jump since 2009.
'We still see more upside for Tata Steel and its structural in nature backed by expectations of strong performance from Indian as well as European businesses, said Ashutosh Somani, an analyst at JM Financial Institutional Securities Ltd. He expects ArcelorMittal's European business to make strong profit for the June quarter, aided by an improving demand scenario as highlighted by Tata, which reported bold results last month.
While steel producers globally are gaining from the surge in prices amid a demand recovery, Mumbai-based Tata Steel - which is one of the most integrated mills in India with access to own iron ore sources - also benefits as major producers China, Russia and Japan look to curb exports.
Siddharth Gadekar is an analyst with Mumbai-based Equirus Securities Pvt. '. Three players will be talking about slowing exports, there is going to be vacuum", explains Siddharth Gadekar, an analyst at EQUIrus Securities Pvt. I called my cell phone.
An improving balance sheet is furthering the bullish sentiment as Tata Steel joins scores of Indian corporates which are using record-low interest rates to reduce their liabilities.
His debt is expected to drop from March 2023 level to 600 billion rupees, exceeding the company's goal of reducing debt by at least 1 billion per year, according to S&P Global, which raised the firm from BB on Tuesday after an upgrade in April.
'The stable outlook reflects our expectation that Tata Steel will continue to deleveraging to improve its resilience against downturns, S&P said in a statement. Tata Steel's yellow credit notes due to 2028, one of India's best performing currency notes, have gained 4.7% this year.
However, the stock’s sharp rally amid a bullish Indian equity market means it is just a whisker away from analysts' average 12 month target price of 1,425. 34 rupees. Still, of the 33 analysts tracking Tata Steel, 28 have sell calls, four have a hold rating and one analyst has a buy call, according to data compiled by Bloomberg.
Earnings may help determine the near-term share performance. The company is expected to report a record net income of more than 90 billion rupees on revenue of 523 billion rupees for the June quarter, according to estimates compiled by Bloomberg. The stock closed up 1.4% in early trading in Mumbai on Thursday.