Analysts Remain Bullish On Tata Steel Citing Deleveraging, Expansion Plan

Shares of Tata Steel Ltd. jumped to a record high as analysts maintained their bullish investment recommendation on the company, citing its efforts to pare debt, generate free cash flow, and move to restart expansion of its Kalinganagar, Odisha plant, among others.

The steelmaker’s net debt stood at Rs 75,389 crore in FY21, down 28% over the previous fiscal. It pared debt by Rs 28,000 crore in the financial year ended March 2021. The company also announced a 5-MTPA expansion plan at Kalinganagar, estimated to be completed by FY24.

  • Tata Steel’s consolidated net profit rose 79.7% over the preceding quarter to Rs 6,644 crore in the three months through March.
  • Its operating profit rose 48% sequentially on the back of higher realisation.
  • Operating profit of the company’s European unit stood at Rs 1,194 crore against a Rs 724-crore operating loss in the last quarter, driven by higher deliveries and higher steel prices.

Tata Steel’s stock rose as much as 5.5% in early trade on Thursday to Rs 1,129 apiece—a lifetime high. But it pared some of the gains to trade 2.6% higher around 10:40 a.m.

Of the 32 analysts tracking Tata Steel, 27 recommend ‘buy’, while four suggest ‘hold’ and one has a ‘sell’ rating, according to Bloomberg data. The stock is trading 9.4% above its average of 12-month price targets compiled by Bloomberg.

What brokerages’ have to say about Tata Steel’s fourth-quarter results…


  • Rates ‘buy’ with a target price of Rs 1,125 apiece.
  • Tata’s Q4 adjusted Ebitda came 18% above the brokerage’s estimates.
  • Rising steel prices drove sequentially higher Ebitda/tonne across businesses.
  • Tata generated free cash flow; net debt fell by Rs 90/share.
  • Tata has restarted its 5-MTPA expansion project at Kalinganagar plant; and expects to complete it in FY24.


  • Rates ‘outperform’ with a target price of Rs 1,045 apiece.
  • Standalone Ebitda of Rs 9,200 crore, 8% ahead of estimates.
  • Tata Steel had earlier indicated capex of Rs 24,000 crore.
  • The beat was driven by better-than-expected steel realisation in key markets.
  • Tata is well positioned on expansion from a cash flow standpoint.

Morgan Stanley

  • Rates ‘overweight’ with a target price of Rs 1,000 apiece.
  • 4Q FY21: In line Ebitda but strong cash flow and net debt reduction.
  • Standalone realisations supported by strong price increases.
  • Tata Steel Europe’s performance was weaker than estimates.
  • Robust cash flow and net debt reduction of Rs 10,800 crore sequentially.
  • Dividend per share of Rs 25, with payout one of the highest in last few years.
  • Restart of Kalinganagar plant phase-2 capex and acceleration of cold rolling mill/pellet plant.


  • Rates ‘buy’ with a target price of Rs 1,150 apiece.
  • Most businesses performed better than estimates.
  • Best ever standalone profitability and Q1 likely to be even stronger.
  • Europe largely in line; clarity awaited on several issues.
  • Deleveraging on track; focus shifts to expansion projects.

Ambit Capital

  • Rates ‘buy’ with a target price of Rs 1,275 apiece.
  • Q4FY21 consolidated Ebidta of Rs 13,900 crore beat expectations (Rs 12,700 crore) by about 10%.
  • Stronger-than-expected India and Tata Steel Europe performance helped drive Q4 beat.
  • Tata Steel Europe performance in Q4 should arrest doubts/underperformance and help regain investor confidence in Tata Steel.
  • Higher earnings, working capital control, lower taxes led to net debt reduction of Rs 3,000 crore above expectation.
  • Tata Steel plans to ramp up capex on Kalinganagar plant phase-2 in FY22, not surprising.
  • Despite higher capex, management guided for more than $1-billion net debt reduction in FY22.
  • Tata Steel remains a strong deleveraging story.

Investec Securities

  • Rates ‘buy’ with a target price of Rs 1,175 apiece.
  • Operational beat across regions, strong cash flow generation aids balance sheet deleveraging.
  • Net gearing less than 1x; growth capex returns (5MT KPO); dividends at Rs 25/share announced.
  • Tata BSL merger with Tata has been approved by shareholders (15:1).
  • Tata Steel BSL current pricing is at 30% premium to exchange ratio is puzzling.
  • Remains constructive on the steel cycle.

What brokerages are watching out for…


  • Earnings outlook particularly for the EU given contract renegotiation.
  • Domestic demand outlook and expansion capex and timelines.

Ambit Capital

  • Sustainability of Tata Steel European performance.
  • Any one-offs in Europe in 4QFY21.
  • Tata Steel Europe buyback 8-9 MT of Co2 allowances in 4QFY21 or purchase in April 2021.
  • Capex allocation for FY22.


  • European profits sustainability.
  • Timeline for Kalinganagar expansion.

Investec Securities

  • ESG: carbon abatement strategy.
  • Corporate structuring: growth plans for each vertical.
  • Tata Steel BSL synergies.
  • Tata Steel Europe: carbon allowances in stock.
  • Macro: any risk on price caps locally, trade measures for EU.

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