Shares of Tata Steel have corrected around 25% in the past one month amid several headwinds, including higher input costs and 15% export duty on select steel products. The metal sector in general has also been affected by rising interest rates as it hurts demand in major metal-consuming sectors like infrastructure and housing, and increases the cost of their large borrowings.
On Thursday, shares of this Tata Group stock declined to a fresh 52-week low of Rs 825 per share amid pressure on metal stocks. At its fresh low, the counter has corrected over 26% in the past one year. From its 52-week high value of Rs 1534.60, the stock is available at 46% discount.
“Metal companies’ earnings were impacted by higher input costs even when the metal prices were at decadal highs. The structural story was in favour of metal companies due to lack of investments in the sector in the last decade and supply cuts led by China’s crackdown on pollution,” said Manish Jeloka, Co-head of Products & Solutions, Sanctum Wealth.
Meanwhile, after global brokerage Citi slashed target price of Tata Steel, JP Morgan too has reduced the target price of the Tata Group stock drastically.
Even though JP Morgan maintained its ‘overweight’ rating on the metal stock, it slashed the target price from Rs 1940 to Rs 1400. It agreed that the balance sheet of the company has never been this strong in the last 10-15 years and valuation of the stock is hovering at historical lows, the stock can further see some correction from current levels. As per the brokerage, the metal stock has also been under pressure due to fears of global recession.
Earlier, Citi maintained a buy rating on the counter, however, it slashed its target price from Rs 1,800 to Rs 1,085.
Brokerage firm ICICI Securities has recommended a ‘Reduce’ on Tata Steel saying asset valuations of the stock are recalibrating given the external environment and a deleveraged balance sheet.
Tata Steel mulls low CO2 steel-making technologies
Meanwhile, the company in its annual report said that Tata Steel is working on a plan for transition to low carbon technologies for making steel in the U.K. and the Netherlands.
In October 2021, Tata Steel had completed the process of separating Tata Steel UK and Tata Steel Netherlands as two independent companies from Tata Steel Europe.
Both, Tata Steel UK and Tata Steel Netherlands have been developing detailed plans for transition to low CO2 technologies in line with the company’s goal to produce CO2-neutral steel by 2050 in Europe, company’s CEO & MD T V Narendran and Executive Director & CFO Koushik Chatterjee said in in the company’s annual report for 2021-22..