Shares of Tata Steel have risen 45% from their 52-week low in nearly seven months. The metal stock hit a yearly low of Rs 82.71 on June 23, 2022. Of late, the Tata Steel stock has been in an uptrend. Shares of Tata Steel have surged 17.71% or Rs 18.1 since December 23, signaling the stock is largely in a bullish trend since 19 days. In the current session, Tata Steel shares were trading 1.91% higher at Rs 120.30. Total 23.45 lakh shares changed hands amounting to a turnover of Rs 28.21 crore on BSE. Market cap of Tata Steel rose to Rs 1.47 lakh crore. The stock hit a 52-week high of Rs 138.63 on April 6, 2022. The large cap stock is trading 13.22% lower to its 52-week high.
In terms of technicals, the relative strength index (RSI) of Tata Steel stands at 60.7, signaling it's neither oversold nor undersold. Tata Steel stock has a one-year beta of 1.3, indicating high volatility during the period. Tata Steel stock is trading higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.
The rally in Tata Steel shares since June-end last year comes despite the firm reporting a weak set of earnings during the period. The stock ended at Rs 83.81 on June 23, 2022. The stock has rallied 43.55% since then.
Tata Steel reported a 21 per cent fall in its consolidated net profit in the June quarter of the current fiscal. The steel major registered a consolidated net profit of Rs 7,714 crore for the quarter ended June 30, 2022, which was lower than the corresponding quarter's Rs 9,768 crore in FY22.
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The firm reported a weak set of earnings for the quarter ended September 2022. Tata Steel's September quarter consolidated profit plunged 90 per cent to Rs 1,297 crore, hit by higher expenses. The Tata group firm had reported a profit of Rs 12,547.70 crore in the same quarter last year.
Here's a look at what analysts said about the prospects of the Tata Steel stock.
Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said, "After a steep fall from Rs 115 levels, the stock has taken support near Rs 100 mark and has shown a bullish rally of almost 18% following a Golden Crossover with the 50 day exponential moving averages crossing the 200DMA moving averages. Currently, the stock is consolidating near its resistance level of Rs 120 which has occurred twice. One can expect some profit booking with near term support of Rs 110 levels. At the same time, for further upside momentum to regain strength, it has to decisively give a breakout above its strong resistance zone of Rs 120 to improve the trend with new targets visible at around Rs 138 and Rs 145 levels."
Meanwhile, brokerage Jefferies has assigned a buy call to the firm against the previous hold stance. While turning positive on Tata Steel, the brokerage has given a 12-month target of Rs 150.
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"After almost a year of cautious view, we turn positive on India metals. China has started to ease Covid policy and support its ailing property sector. We believe worst-margin quarter for Indian steel, and the big chunk of earnings cuts for Tata Steel and Hindalco are behind," Jefferies said.
Jefferies said it likes Tata's improving asset footprint with share of India in total volumes up from 33 per cent in FY15 to 62 per cent in FY22. Tata's 5mtpa brownfield expansion should also start contributing to volumes by FY25, it said, adding that the brokerage expects share of higher-margin India-business in Tata Steel's consolidated volumes to rise to 67 per cent by FY25E.
"We expect Tata Steel to generate negative free cash flow (after interest payment) in FY23 with NINL acquisition and working capital outflow, but see this turning positive in FY24-25E to Rs 11-13 per share," it said.
ICICI Direct expects Tata Steel to move toward Rs 127, which is 80 per cent retracement of April-June 2022 decline (R138-83) over the next few months while strong support is placed at Rs 98.
Abhijeet from Tips2trade said, "Tata Steel needs to close above Rs 119.6 on the Daily charts to move up to Rs 126-132 in the near term. Currently, the trend is weak and long-term investors should keep a strict stop of Rs 117.6."
Ravi Singh, Vice President and Head of Research, Share India said, "Tata Steel stock is showing improvement since the government has removed the export duty completely as compared to 15 per cent earlier, which is a big boost to domestic steel players. However, the global steel demand and steel prices have turned subdued since last few months, the nil export duty may strengthen the domestic export volumes once the prices improves. Tata Steel stock may also improve further as suggested by the technical oscillators for the target of Rs 125 levels in short term."
Jitendra Upadhyay, senior Equity Research Analyst, Bonanza Portfolio said, "Due to lower steel realization and higher raw material costs, EBITDA/t fell by 59% QoQ to Rs 10,117 during the most recent quarter of FY23 (mainly co*king coal). Lower sales volume and poor realisations also had an impact on the profitability of European businesses. Consolidated net debt rose, driven primarily by the purchase of Nilanchal Ispat, dividend payments, and capital outlays. Stock has rallied more than 43% from its 52-week low, we may conclude that there is a pre-budget rally in the stock."
Osho Krishan, Sr. Analyst - Technical & Derivative Research, Angel One said, "Tata Steel has seen a sloping trendline breakout on the daily chart near the Rs 114- Rs 115 zone that even coincides with the previous swing high, construing a positive development for the counter. The surge has been backed by decent volumes, supporting the optimistic view on the counter. At present, it has taken a breather and is nearing the breakout zone. As far as levels are concerned, the support is placed around the bullish gap of the Rs 112-113 zone, sustaining above which the view remains bullish. On the higher end, Rs 120-122 can be seen as intermediate resistance, followed by the weekly swing high of the Rs 130-132 odd zone from a short-term perspective."
