Shares of Tata Steel rose over a percent on Wednesday after JP Morgan’s bullish commentary on the steelmaker.
The foreign brokerage firm has an ‘overweight’ stance on the stock with a target price of Rs 1,400, which implies a more than 58 percent upside from the current market price.
At 11:09 IST, shares of the steel manufacturer were trading 0.4 percent higher at Rs 883.05 on the BSE.
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This bullish commentary by JP Morgan comes after rating agency Moody's Investors Service revised the outlook on Tata Steel to ‘positive’ from ‘stable’ on Monday.
The rating upgrade took into account the company's growing track record of delivering a solid operating performance while maintaining conservative financial policies.
Tata Steel’s Europe business remains strong as large contracted sales volumes give average selling price visibility, said JP Morgan. Volumes in India business are picking up as consumer destocking is behind the company, it added.
The second quarter of FY23 is likely to see the full impact of the lower average selling price per tonne and higher coal, JP Morgan pointed out.
The foreign brokerage firm believes that investor pessimism is excessive as compared to the steel cycle, the company’s earnings outlook and debt profile. It added that the company’s plan to reduce the net debt of about $1 billion is also on track which is another positive.
JP Morgan sees upside risk to its net debt reduction forecast for FY23 given strong underlying cash flows.
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