Tata Steel shares fell 2.5% today to close at ₹165.60 on the BSE after the company reported weak quarterly results. The stock hit an intraday low of ₹160.50 before recovering some losses. The steel giant’s operating revenue declined 5% year-over-year to ₹32,960 crore in Q1 FY2025. Pre-tax margin contracted to 0% from 8% in the year-ago period. Return on equity (ROE) fell to -4%, indicating poor profitability. The debt-to-equity ratio remained elevated at 56%.
Main Points
From a technical standpoint, Tata Steel is trading close to its 50-day moving average (DMA) and comfortably above the 200 DMA, around 7% higher. It needs to take support around the 50 DMA level to continue the upside momentum. The stock is currently forming a base in its weekly chart and is trading 12% away from the crucial pivot point.
Key support levels to watch out for are ₹160 and ₹155. If the stock breaks below ₹155, it could slide further to ₹150. On the upside, resistance is seen at ₹170 and ₹175. A breakout above ₹175 could propel the stock towards the 52-week high of ₹184.60.
Tata Steel’s market capitalization stands at ₹1,92,183 crore as of September 26, 2024. The stock is trading at a price-to-earnings (P/E) ratio of -50.2 and a price-to-book (P/B) ratio of 2.2.
The company has a debt-to-equity ratio of 99%, which is on the higher side. Institutional holding has increased in the latest reported quarter, a positive sign. Analysts have a ‘BUY’ recommendation on the stock with an average target price of ₹167.
The steel industry is cyclical in nature, and global economic conditions play a significant role in Tata Steel’s performance. Factors such as raw material prices, demand-supply dynamics, and government policies impact the company’s profitability and share price.
The recent drop in Tata Steel’s share price can be attributed to the weak quarterly results, which missed market expectations. The company’s inability to pass on higher costs to customers due to intense competition has weighed on its margins.
Analysts remain cautious on Tata Steel’s near-term outlook due to the challenging industry environment. However, they believe the company’s long-term prospects are bright, given its strong market position, diversified product portfolio, and focus on value-added steel.
Tata Steel’s acquisition of Bhushan Steel and its foray into the automotive and special steel segments are expected to drive growth in the coming years. The company’s focus on cost optimization and debt reduction should also improve its financial performance.
