Tata Steel slides 2.75% at open despite in-line Q2 results; analysts divided on recovery path

Tata Steel's shares experienced a significant decline of 2.75% in early trading on Monday, opening at ₹192.50 and closing at ₹184.97 by mid-session. The sharp drop occurred following the company's Q2 quarterly results, released over the weekend, and heavy selling pressure. The stock reached a low of ₹184.58, falling below its prior close of ₹190.20 and currently trading 17.5% below its 52-week high of ₹224.40, set in May.

Despite the disappointing earnings, Tata Steel maintained that its Q2 performance was in line with expectations.

Consolidated EBITDA for the quarter increased by 18% year-on-year and 14% quarter-on-quarter, reaching ₹10,665 crore. The India operations displayed a healthy EBITDA margin of 25%, whereas UK operations faced challenges, resulting in an EBITDA loss of ₹719 crore due to a 22% drop in deliveries and weak demand. Brokerage firms have mixed opinions on the stock's near-term prospects.

Elara Securities upgraded the stock to Buy, setting a target price of ₹235, while CLSA and Nuvama both maintain an Outperform rating with a target of ₹225.

Motilal Oswal and Kotak also upgraded their recommendations, with targets of ₹220 and ₹200, respectively. However, Goldman Sachs remains neutral on the stock, citing unresolved regulatory uncertainties in Europe and challenging market conditions as factors weighing on their outlook. Tata Steel's management anticipates a stronger second half of the year, driven by higher domestic volumes, improving steel realisations, and the Netherlands plant reaching a target of around 1.7 million tonnes in quarterly deliveries. The company's net debt stands at ₹91,423 crore, with a net debt-to-EBITDA ratio of 2.4x.