Tata Steel will remain in focus today after reporting an 87% year-on-year drop in consolidated net profit for the September quarter to Rs 1,514 crore reported on October 31. Tata Steel’s profit fell 80% quarter-on-quarter.

Consolidated revenue remained flat, down slightly by 1% year-on-year to Rs 59,878 crore. It was down 6% sequentially.

CLSA has downgraded the stock to “sell” and lowered its target price to Rs 90 per share from Rs 110.

Second-quarter results came in below expectations as weak India offset strong Europe. CLSA expects margins to improve in India but a sharp drop in profitability in Europe. It also sees downside risks to Indian steel prices as they trade at a 12-16% premium to import parity.

According to CNBC-TV18, the brokerage lowered its FY23-25 ​​EBITDA estimate by 18-25% due to lower profitability (mainly in Europe).

The stock is currently trading at 4.8x FY23 EV/EBITDA and 1x P/B. Motilal Oswal believes the stock is fully valued given the current outlook for global steel prices.

We do not expect a significant increase in steel prices in the near term while rising coking coal prices remain a margin concern in Q4FY23. We maintain our ‘Neutral’ rating on Tata Steel with a SoTP-based target price of Rs 91.