Tata Steel Long Products Ltd. share price target

Steeper Rise in Raw Materials Cost, Hit Earnings: Tata Sponge Iron has reported mixed set of numbers wherein its consolidated revenue from operations has grown by 21.6% to Rs. 2608 Mn on YoY basis. However, EBITDA registered de-growth by 36.9% mainly due to sharp increase in raw materials cost by 49% on YoY basis.

Mixed Performance, Better Times Ahead: Tata Sponge Iron Ltd. has posted a weaker set of quarterly numbers mainly on account of shutting down of all three kilns for maintenance activities for forty days which led to short-fall in sponge iron production by 19% and in power generation by 16%.

We maintain Buy on Tata Sponge (TSIL) with a revised TP of Rs1160. Q2 results were weak due to exceptional circumstances which led to high iron ore and maintenance cost. Overall, we expect strong operational performance during FY19-20E led by robust pricing, healthy spreads and increasing volumes as additional EC clearance of 40ktpa is expected soon. Clarity on capex towards the build-up of new steel complex is still elusive but strong cash rich balance sheet...

We upgrade Tata Sponge (TSIL) to Buy with a revised TP of Rs1220 as we expect strong operational performance to be maintained led by better pricing, solid volumes and tight control on conversion costs leading to further improvement in spreads. TSIL has received a much needed relief by getting its related party resolutions passed in the re-voting which would help maintain status-quo in running of operations in the most efficient manner. Clarity on capex towards the build-up of new steel complex is still elusive but strong cash rich balance sheet...

We continue to remain positive on TTSP's strong business model. The recent increase in iron ore costs and coal prices (due to INR depreciation), we feel spread would remain subdued in the coming quarters as well. Factoring this, we have revised our earnings estimates downwards to Rs96.8 (earlier Rs98.5) and Rs89.4 (earlier Rs98.7) for FY19E and FY20E, respectively. Sponge iron realisation declined by Rs2,700/tonne from its high of Rs26,700/tonne in the month of September 2018. Post the recent correction in the stock price, we feel at CMP, the stock is trading at 2.6x FY20E EV/EBITDA, is attractive and risk-reward is favorable....

Tata Sponge (TTSP) Q1FY19 reported numbers were in-line with estimates. Higher realisation and improvement in operating leverage led to a 56.1% YoY jump in EBITDA to Rs603 mn (down 2.2% QoQ), with an EBITDA margin of 23.1% (below estimates). TTSP's spread in sponge iron segment continued to...

Buoyant Steel Consumption, Pushing Sponge Iron Demand: Tata Sponge Iron Ltd. has posted a strong set of earning numbers on the back ofbuoyant steel demand in the domestic market which has been pushing for spongeiron demand.

Higher Realization Pivotal to Overall Growth: Higher realization and expectation that the same to remain high, pick up in manufacturing and push provided to infrastructure, would continue to drive revenue for Tata Sponge IronLimited in next couple of years. The management has given positive guidance for next fiscal year and has set sponge iron production target of 425000 MT by FY19E.

We maintain our Hold rating on Tata Sponge (TSIL) with a revised TP of Rs1130 as we see valuations fair with historic high spreads having marginal downside risks and surplus cash on books expected to be deployed as CWIP in the steel plant capex over the next few years. Q4 earnings were very strong YoY led by better pricing and solid volumes. TSIL's spreads in sponge iron business have continued to improve but sustenance of the same at current high levels for long periods of...

Higher realization leads to significant margin expansion: Better volume growth wherein company produced 1,08,841 MT in Q3FY18 compared to 97,907 MT last year and higher average realization of Rs. 17300 per MT in Q3FY17 ledto strong EPS growth of 227.8% on YoY basis.

We downgrade Tata Sponge (TSIL) to Hold with a revised TP of Rs1165 as recent sharp run-up leaves limited upside on the table given the fact that surplus cash on books would be deployed as CWIP for steel plant capex over FY19-20E. TSIL's spreads in sponge iron business have continued to improve and outlook on the sustenance of the same is strong which gives confidence of smart uptick in earnings over FY18-19E. Q3 earnings were strong YoY led by better pricing and company remains on track to achieve its full year volume targets. Stock trades at FY19E EV/EBITDA of 4.9x and a five year AOCF/EV yield of 6.8% which is fair....

Robust Domestic Demand and Protectionist Measure to Stimulate Sale: Tata Sponge Iron Limited generated higher volume and higher operating profit in FY17 on the back of its continuous efforts to enhance the value of the product and efficient business and operating processes.

Revenue rose by 16.48% to Rs. 167.17 Cr in Q4FY17 when compared to the previous quarter. Also, it rose by 19.08% when compared with Q4FY16.

Sponge iron industry is likely to see higher capacity utilization and better price realization, amid expectations over robust growth in steel demand at a CAGR of 15% after FY17E on the back of projected GDP growth of 8.1-8.5% in the coming years.