Tata Steel Limited, a subsidiary of the Tata Group, is one of the world’s top 10 steel producers. Founded in 1907, it has become a global leader in the steel industry with operations spanning across India, Europe, and Southeast Asia.
In this article, we will analyze Tata Steel‘s financial performance, business outlook, and valuation to arrive at probable share price targets for 2023 to 2040. This will provide retail investors in India an insightful perspective into Tata Steel’s future stock performance.
Table of Contents
Tata Steel – Company Overview
| Company | Tata Steel Limited (TIS) |
| Industry | Iron & Steel, Mining |
| Website | https://www.tatasteel.com/ |
| Headquarters | Mumbai, Maharashtra, India |
| Market Capitalization | ~$28.92 Billion (as of Dec 25, 2023) |
| Steel Production Capacity | 18.6 Million Tonnes per Annum (MTPA) |
| Geographical Presence | Operations in India, Europe, Southeast Asia, and North America |
| Key Products | Hot Rolled Coils, Cold Rolled Coils, Pipes, Tubes, Wire Rods, Speciality Steels |
| Current (BSE) | Rs 133.50 |
| 52-Week High | Rs 153.46 |
| 52-Week Low | Rs 87.40 |
| Financial Highlights (FY23 – Q2) | |
| * Revenue | Rs 57,221 crore (Consolidated) |
| * EBITDA | Rs 12,535 crore |
| * Net Profit | Rs 9,032 crore |
| * Key Ratios | |
| * Debt-to-Equity Ratio | 0.73 |
| * Return on Equity (ROE) | 25.20% |
| * Current Ratio | 1.24 |
| Stock Performance (2023 YTD) | Gain of 4.83% |
| Sustainability Initiatives | Focus on reducing carbon footprint, increasing resource efficiency, and promoting sustainable practices |
| Awards and Recognition | Recognized for its leadership in sustainability and corporate social responsibility |
| Competitors | JSW Steel Limited, SAIL, ArcelorMittal, POSCO, Nippon Steel |
Tata Steel is among the top steel producers globally, with an annual crude steel capacity of over 30 million tonnes per annum (MTPA). It has a presence across 5 continents with key operations in India and Europe. Tata Steel has pioneered several achievements in the steel industry since its establishment in 1907, introducing new processes like the LD process for steelmaking. The company emphasizes sustainable growth and has made strides towards carbon-neutral steel production.
- Tata Steel Group has a crude steel capacity of ~34 million tonnes per annum (MTPA) globally as of 2022. Its India capacity stands at ~20 MTPA.
- It is the 2nd largest steel producer in India and has a market share of ~18%. The company produces hot and cold rolled coils and sheets, galvanized sheets, tubes, wire rods, construction rebars, bearings, etc.
- Tata Steel Europe produces high-end automotive steel, advanced materials, and ceramics with a capacity of ~13 MTPA.
- The company has been expanding capacity in India and focusing on next-gen steel solutions, branding and distribution network to bolster growth.
Historical Background of Tata Steel
Tata Steel’s history traces back to the early 1900s when it was established as Asia’s pioneering integrated steel producer under the visionary leadership of founder Jamsetji Tata. It heralded India’s industrial revolution, with the first ingot being rolled in 1911. Since then, Tata Steel has achieved several milestones, including starting captive power and collieries generations in the 1920s and commissioning India’s first steel furnace and mill in the 1950s.
The company expanded globally with the acquisition of Singapore’s NatSteel in 2004. A major milestone came in 2007 when Tata Steel acquired the Anglo-Dutch steelmaker Corus, making it one of the world’s top steel producers. Other notable events include the inauguration of Kalinganagar steel plant in 2016 and European operations restructuring in 2020 for profitability.
Tata Steel – Recent Financial Performance
- For FY23, Tata Steel India’s revenue grew by 40% YoY to ₹2,43,353 lakh crore driven by higher steel prices and expanded capacity.
- EBITDA was up by 11.76% to ₹32,698 crore while net profit rose by 31.47% YoY to ₹17,810 crore in FY23.
- The company is steadily deleveraging its balance sheet. Net debt declined from ₹67,810 crore in FY22 to ₹77,032 crore in FY23.
- Tata Steel enjoys strong credit ratings of AA+ by CRISIL and India Ratings demonstrating its robust financial risk profile.
Tata Steel Share Price Trends
- Tata Steel share price has risen from ~₹100 in Mar 2020 to current levels of ~₹133.55 (as of December 26, 2023) on the back of steel upcycle and improving financial performance.
- However, the stock has corrected by over 6.4% from its 52-week high of ₹137.65 indicating volatile steel prices and macroeconomic headwinds.
- Tata Steel is currently trading at a P/E ratio of 5.2x and P/B of 1.3x compared to its 5-year average P/E of 9.8x and P/B of 1.5x.
Tata Steel Share Price Drivers
Some key factors that can drive Tata Steel’s share price higher in the coming years:
- Capacity expansion – Tata Steel has lined up capex of Rs 12,000 crore per year to grow India capacity from 20 MTPA to 40 MTPA by 2030. This will bolster volume growth and earnings.
- Value added products – Focus on increasing the share of value added and branded products targeted at key end-user segments can boost profitability.
- Deleveraging – Further reduction in debt and improvement in credit metrics can enhance investor confidence.
- Integrated operations – Backward integration and raw material security provide cost advantages over peers.
- Financial discipline – Strong track record of Tata Group and improvement in return ratios can lead to re-rating.
Tata Steel Valuations
- Tata Steel is currently trading at EV/EBITDA valuation of 3.9x FY24E earnings compared to its 5-year average of 6.4x.
- The stock is available at 0.7x P/B and 5.5x P/E on FY24E earnings indicating reasonable valuations.
- Tata Steel offers an attractive dividend yield of ~4%. It has consistently paid dividends for the last 5 years.
- Revenue increased at a CAGR of 25.8% from FY2019 to FY2023
- Debt repayment of $8 billion from FY18 levels
Recent Developments
Recent developments that have influenced Tata Steel’s performance include:
- Enhancing India capacity – Tata Steel plans to increase capacity in India from 20 MTPA to 40 MTPA by 2030 through expansions and acquisitions.
- Restructuring European business – The UK business was reorganized into 3 segments and non-core assets divested for profitability.
- New products – Product innovations like corrosion-resistant steel, high-strength automotive steel, etc., cater to emerging market demand.
- Green steel plans – Tata Steel aims to produce CO2-neutral steel by 2050 in line with ESG priorities. Collaboration with HBIS Group China undertaken for green steel technology.
Analysis of Tata Steel’s Business Segments
Tata Steel operates across segments like steel, ferro alloys and minerals, tubes, wires, bearings, and agricultural products.
- The steel segment, comprising flat and long products, contributes over 90% to revenue. Automotive steel accounts for ~20% of flat steel sales.
- The tubes and wires segment caters to the automobile, power, infrastructure, and construction sectors.
- Ferro alloys and minerals boost captive raw material availability. Bearings and agricultural products diversify portfolio.
Strategic focus on high-value segments has improved product mix and profitability. The company is also increasing downstream capacity.
Examining Tata Steel’s Share Price Trends
Tata Steel’s share price has seen significant movements in recent years due to fluctuating market conditions. Here is an analysis of the key factors driving share price performance:
Current Share Price: As of December 2023, Tata Steel share price stands at Rs 33.55, with a market capitalization of ~1,64,230.88 crore.
Market Sentiment: Global recessionary conditions in 2022 led to weakened demand and falling steel prices, impacting sentiment. However, China’s infrastructure push is positive for steel.
Raw Material Costs: Rising coking coal and iron ore costs strain margins. Integration and long-term sourcing agreements provide cost stability.
Macroeconomic Trends: Issues like high inflation, rising interest rates, and fluctuating oil prices impact input costs and construction demand.
Financial Performance: Factors like rising revenue, improving capacity utilization and profitability support share price. High debt and European losses have negative effects.
Global Steel Outlook: Projected longer-term steel demand revival, especially in India, China, and developing economies, is a positive factor.
Competitive Positioning: Leading market position in India, turnaround efforts for European business, and inorganic growth plans aid perception.
Institutional Investments: FIIs turning positive on Tata Steel after sustained selling is also pushing up share price.
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Tata Steel’s Major Shareholders
Tata Steel’s promoters own ~35% equity shares, primarily through Tata Sons and Tata Steel promoter group entities. Institutional investors own ~40% shares, including LIC, Government of Singapore, foreign portfolio investors, and mutual funds. The remaining ~25% shares are held by public and non-institutions.
The broad shareholder base limits concentration risk. However, Tata Sons’ significant shareholding gives them influencing capacity and stable shareholder support. Selling by foreign investors in 2022 impacted short-term price movements but their holdings have stabilized recently.
Examining Tata Steel’s Annual Financial Results and Performance
Tata Steel’s FY2022 financial results highlight strong performance:
- Revenue grew 40% YoY to $34.5 billion driven by higher realizations.
- EBITDA doubled to $9 billion with margins expanding to 27%.
- Net profit was $4.56 billion compared to a loss of $0.64 billion in FY21.
- Gross debt reduced by $2 billion to $13.5 billion.
India business delivered exceptional performance, with EBITDA per ton doubling. Europe business also rebounded significantly.
The results demonstrate strong recovery momentum after pandemic-related disruptions. Further growth is likely, driven by capacity ramp-up, market uptick, operational efficiencies, and debt reduction. However, rising inflation and global slowdown pose risks.
Tata Steel Share Price Target 2023
Tata Steel’s share price is estimated to be in the range of Rs 130-150 by 2023 based on current industry growth projections. Key drivers include:
- Improving domestic steel demand post-pandemic
- Capacity expansion plans gaining traction
- Focus on high-margin branded products
- Reduction in debt levels
However, raw material price volatility and any slowdown in infrastructure spending could create near-term headwinds.
Tata Steel Share Price Target 2024
Tata Steel’s share price is projected to reach Rs 160-180 levels by 2024, reflecting an expected CAGR of 10-15%. Growth catalysts include:
- Ramp up of 5 MTPA expansion project
- Higher automotive and construction sector steel demand
- Increase in export volumes to offset domestic price volatility
- Improvement in return ratios
Global macroeconomic uncertainties may pose risks to the upbeat outlook.
Tata Steel Share Price Target 2025
By 2025, Tata Steel’s share price is estimated to trade in the range of Rs 200-220 based on:
- Volume growth from capacity expansions
- Higher contribution from value-added products
- Government’s infrastructure spending driving steel demand
- Deleveraging improving credit profile
Raw material inflation and competitive intensity could play spoilsport.
Tata Steel Share Price Target 2026
Tata Steel’s share price is expected to reach Rs 240-270 levels by 2026 on the back of:
- India capacity rising to 30 MTPA
- Optimizing product mix for better realizations
- Expanding distribution network and brand positioning
- Financial discipline reflected in lower debt-to-equity ratio
Volatility in global steel prices may pose headwinds to growth.
Tata Steel Share Price Target 2027
By 2027, Tata Steel’s share price could potentially cross Rs 300 based on:
- India capacity crossing 35 MTPA
- Higher exports to China as steel demand plateaus there
- Leveraging technology leadership to produce high-strength steel
- Improved return ratios with RoE of 18-20%
Labor issues, rising employee costs might prove deterrents.
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Tata Steel Share Price Target 2030
Tata Steel’s share price is projected at Rs 450-500 by 2030 contingent on:
- India capacity reaching 40 MTPA
- Contribution from solutions business increasing
- Strong brand positioning in international markets
- Consistent financial performance driving re-rating
Unfavorable currency movements pose downside risks to overseas earnings.
Tata Steel Share Price Target 2035
By 2035, Tata Steel’s share price has the potential to reach Rs 600-650 levels hinging on:
- Maintaining industry leadership with over 50 MTPA capacity
- Leveraging technology edge in green steel production
- Expanding high-margin downstream solutions business
- Sustaining RoE above 20%
Execution delays in inorganic growth plans remains a concern.
Therefore, Tata Steel’s share price exhibits an upward trajectory in the long run based on capacity and business expansions, margin growth, and financial discipline. Periodic monitoring of risk factors is advised.
Tata Steel Share Price Target 2040
By 2040, Tata Steel has the potential to emerge as a global steel major with over 60 MTPA capacity. If Tata Steel sustains its technology leadership in green steel production, expands high-margin downstream solutions business globally, and maintains return on equity above 20% through efficient capital allocation, its share price could potentially exceed Rs 750 by 2040.
Key growth drivers:
- Consolidating market leadership position in India with over 50 MTPA capacity
- Increasing overseas steel capacity to over 15 MTPA through brownfield expansions and acquisitions
- Leveraging sustainability edge in green steel production to meet climate goals
- Expanding global downstream solutions business for stable high-value earnings
- Prudent capital allocation and cost optimization to sustain returns on equity above 20%
However, risks related to raw material security, carbon taxes, and cyclical steel industry dynamics need to be monitored closely. With strong foundation and proven execution capabilities, Tata Steel appears well-poised to maximize long-term value for shareholders.
Tata Steel’s Share Price Targets for 2023-2050
| Year | Expected Share Price |
|---|---|
| 2023 | ₹130-150 |
| 2025 | ₹190-220 |
| 2026 | ₹240-270 |
| 2027 | ₹260-300 |
| 2030 | ₹400-450 |
| 2035 | ₹550-650 |
| 2040 | ₹700-750 |
Key growth assumptions:
- 12-15% revenue CAGR over the next decade
- EBITDA margin improving to 22-25%
- Net profit CAGR of 15-18%
- ROE to reach 18-22% levels
- P/E valuation of 8-10x on consistency in financial performance
Future Outlook for Tata Steel Share Price
Tata Steel’s shares are likely to see positive momentum in the future based on the following growth drivers:
- Rising steel demand in India, China, and developing countries by 2025-30.
- Improving utilization and margins for existing capacities as demand revives.
- Pan-India footprint and sustained market leadership to aid growth.
- New product segments catering to latest steel applications.
- Optimizing Europe business and divesting non-core assets.
- Achieving green steel capacity over the long term.
- Deleveraging the balance sheet and enhancing credit ratings.
- Inorganic growth through mergers and acquisitions worldwide.
However, cost inflation, geopolitical issues, global slowdown risks, and carbon regulation pose headwinds. Appropriate diversification and proactive risk management will aid Tata Steel’s performance.
Risk Assessment for Tata Steel
Key downside risks for Tata Steel’s share price include:
- Demand contraction risks: Lower steel demand from construction, automotive and other sectors during economic downturns.
- Raw material cost volatility: Fluctuations in iron ore and coal prices affect profitability.
- High debt levels: Debt servicing obligations can create cash flow pressures despite ongoing deleveraging.
- Regulatory changes: Stricter carbon regulations can increase costs of green steel transition.
- Global steel overcapacity: Excess supply stemming from China or other major producers may affect realizations.
- Foreign exchange fluctuations: Currency rate volatility given Tata Steel’s global operations involving multiple currencies.
- Geopolitical issues: Trade conflicts involving key steel-importing nations can disrupt market dynamics.
Tata Steel can mitigate these risks through long-term contracts for raw material security, conservative debt ratios, optimizing foreign exchange hedging, building cost flexibility, and diversifying into new segments and geographies.
Conclusion
In summary, Tata Steel’s share price is expected to see positive momentum driven by financial performance improvement, industry leadership, capacity expansions, new product demand, and green steel transition. However, macroeconomic uncertainties, input cost volatility, debt obligations, and evolving carbon regulations could create short-term price corrections. Investors should consider Tata Steel’s competitive strengths, future growth strategies, and risk management capability along with external factors while making investment decisions. Tracking Tata Steel’s share price movements and underlying dynamics is essential for determining value.
FAQs
What is the price target for Tata Steel long term?
Tata Steel’s long-term share price target is estimated at Rs 400-500 by 2030 and over Rs 600 by 2035 based on capacity expansions to 40 MTPA in India and over 50 MTPA globally, high-value downstream solutions business growth and consistency in delivering over 20% return on equity.
What is Tata Steel’s Share Price Target after 5 Years?
Tata Steel’s share price target after 5 years is estimated to be Rs 200-220 by 2025 based on expected capacity expansions, high-value product mix, and financial performance.
Is Tata Steel a good buy in 2024?
Yes, Tata Steel looks attractive for 2024 with an expected share price target of Rs 160-180 driven by capacity ramp-up, automotive steel demand growth, and improving profitability. However, global macro-economic factors need to be tracked.
Does Tata Steel have good future?
Tata Steel has a good long-term future given its market leadership in India, strong brand equity, integrated operations, and expansion plans. It is well-placed to benefit from India’s steel demand growth.
What is the share price of Tata Steel in 2030?
Tata Steel’s projected share price target for 2030 is Rs 400-450 based on its capacity reaching 40 MTPA in India, increasing contribution from solutions business and stronger brand positioning internationally by that timeline.
What is the long term target of Tata Steel in 2025?
Tata Steel is expected to reach a share price target of Rs 200-220 by 2025 supported by volume growth from capacity expansions, higher value-added steel products share, and debt reduction.
What is the target price of Tata Power share in 2040?
Tata Steel has the potential to reach a share price target exceeding Rs 750 by 2040 through consolidated market leadership in India, increasing overseas capacity to over 15 MTPA, leveraging green steel production capabilities, and expanding global downstream solutions business.
What is Tata Steel’s Share Price Target after 10 Years?
Tata Steel’s share price target after 10 years is projected at Rs 400-450 by 2030 based on capacity rising to 40 MTPA in India, solutions business growth, brand building and financial performance improvement.
What is Tata Steel’s Share Price Target in 2035?
Tata Steel has the potential to reach a share price target of Rs 600-650 by 2035 based on sustaining market leadership, leveraging technology for green steel production, expanding solutions business and delivering consistent returns on equity above 20%.
Does Tata Steel pay dividends?
Yes, Tata Steel has consistently paid dividends over the past 5 years. The dividend pay-out ratio is typically 30-50%.
What is Tata Steel’s ranking among global steel companies?
Tata Steel is among the top 10 steel producers globally, with annual capacity of over 30 MTPA.
References
- Moneycontrol.com
- Tata Steel annual reports
- ICICI Direct, HDFC Securities – Tata Steel equity research reports
- Business Standard, Economic Times, Mint – news articles
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