Is it worth investing in the best performing Nifty stock, post robust Q1 results?

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Tata Steel shares have rallied 250% over the last year has reported another quarter of strong performance. The top performer of the Nifty 50 pack reported a consolidated net profit at Rs 9,768 crore in the quarter ended 30 June 2021. The steelmaker had posted a net loss of Rs 4,648 crore in the year-ago period. On a sequential basis also, the steelmaker’s consolidated profit grew 34% Q-o-Q from Rs 6,644.15 crore in Q4FY21.

India’s largest steel maker’s revenue from operations for the quarter in review jumped 109.5% to Rs 53,372 crore as against Rs 25,662 crore in June 2020 quarter. While on the operational front it reported the highest-ever quarterly consolidated EBITDA (earnings before interest tax depreciation and amortization) as it increased 13.3% Q-o-Q and 25.7 times Y-o-Y to Rs.16,185 crore led by improved realization.

Crude steel production increased by 54.8% on Y-o-Y basis, however, declined 2.6% Q-o-Q to 4.63 million tons, impacted by the supply of over 47,800 tons of liquid medical oxygen to hospitals during the quarter amidst the 2nd wave of COVID-19 pandemic.

Overall deliveries increased by 41.7% on Y-o-Y basis, however, declined 11%Q-o-Q to 4.15 million tons due to partial lockdowns announced by some of the states and temporary shutdowns in few steel-consuming sectors amidst the 2nd wave of COVID-19 pandemic.

The company also pointed out that the domestic steel prices continue to be at a steep discount to China import parity prices, in a regulatory filing.

With such strong performance and further scope for improvement, most brokerages are upbeat on the stock. Here is what they have to say:

CLSA | Rating: Buy | Target price: Rs 1,750

CLSA has maintained its buy rating on the stock as Q1 adjusted consolidated EBITDA was in line with healthy domestic business offsetting weaker EU profitability. While the standalone profitability continued to surprise at 12% – better than the estimates. However, there was some disappointment largely on a higher Q-o-Q cost increase. The impact on free cash flow due to working capital increase could be transient, opines CLSA.

JPMorgan | Rating: Overweight | Target price: Rs 1,810

The global brokerage firm has raised its target price to Rs 1,810 from Rs 1,610 earlier with the company posted highest-ever EBITDA & PAT in a quarter where volume was impacted from the 2nd wave. The debt declined further Q-o-Q even after a substantial working capital build in Q1.

At 10:15 am shares of Tata Steel were trading at Rs 1,446.80 apiece up by Rs 11.45 or 0.80%.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)