Tata Steel Rating- Hold- Mega merger to bring in material benefits
时间:2024-06-26 16:37:39 阅读(143)
By Edelweiss research
We perceive the Tata Steel (TSL) board approving the amalgamation of seven subsidiaries with the parent as a prudent step. Key points: (i) Lower iron ore cost for subsidiaries such as TSLP and Tata Metaliks. (ii) Iron ore assets of the group are likely to be balanced through the lease life. (iii) Potential synergies across sales, marketing, procurement and logistics likely to accrue over medium to long term. For the TSL stock, we see the near-term benefits of cost/operating synergies being offset by potential dilution; however, the stock prices of subsidiaries are likely to recalibrate to the ones implied by the swap ratio. Maintain ‘HOLD’ on TSL with an unchanged TP of Rs 98.5/share on 5x Q2FY24e Ebitda.
Also Read: FPIs pump in Rs 8,600-cr in Sep; pace of investment slows
Streamlines product portfolioWe see the group’s long products’ strategy getting a firm direction as there could be sharper management oversight on expansion plan/integration of NINL. Besides, TSL’s existing long portfolio is likely dovetail with the proposed expansion, resulting in optimisation of product offerings. In our view, the amalgamated subsidiaries are also likely to benefit from TSL’s existing client base. On the procurement front, common sourcing of key raw materials such as iron ore and limestone would also reduce cost.
Outlook: Benefits to be realised over time; maintain ‘HOLD’ We perceive the proposed amalgamation scheme in line with management’s strategic intent of simplifying the structure and unlocking value. In our view, the benefits of lower iron ore royalty cost are likely to be immediate, but the more strategic ones such as portfolio optimisation, sharpened focus on long products and cross-functional benefits are likely to accrue over a period of time. In terms of the stock reaction, for Tata Steel, we see the benefits of incremental Ebitda from subsidiaries to be offset by dilution in shareholding. The stock prices of listed subsidiaries are however, likely to recalibrate to the one suggested by the swap ratio. We maintain ‘HOLD’ on TSL with an unchanged target price of Rs 98.5 on 5x Q2FY24e Ebitda. Other listed subsidiaries of TSL are not rated.
猜你喜欢
- Lunar Eclipse 2022- Did you get a glimpse of Chandra Grahan- This is how the Moon appeared in different parts of the world
- KFin Technologies IPO subscription status- Issue past half-way mark, institutions quota nearly full on Day 1
- Management churn at Shoppers Stop leaves investors jittery
- Nifty to extend gains or correction on cards- Check US stocks, Asian markets, FII activity, SGX Nifty, more
- L&T Construction bags EPC order for AMAALA project in the Red Sea region, Saudi Arabia
- Mamaearth parent files for IPO; Shilpa Shetty, Kunal Bahl to sell partial stake, Sequoia not to sell in OFS
- Jeera prices hit record level on lower output and robust demand
- Nifty likely to reclaim 18725, continue upmove; buy SBI Life, ICICI Bank, others to pocket short-term gains
- Jewellers expect sales during Akshaya Tritiya to surpass 2019 level