Brokerage firms CLSA and Credit Suisse dispensed advise to investors that this is the best time to exit Tata Steel while the steel producer is enjoying a progressive rally in the stock market.
CLSA discussed in a joint report with Credit Suisse that investors should sell at INR 215 per share. The equity power broker remains unmoved about the company's long-term capability. CLSA cites that the Tata's rise may waver courtesy of its unstable India margins, the steel demand and supply in India and Europe, ballooning company debts and the weakening of the rupee.
"Stock is down significantly YTD but valuations at 0.9x FY14 tangible P/B (excl goodwill) are not cheap yet," the report noted.
Today, Tata's shares went up by 9% at INR263, and were traded at share price of INR256.65. The price increase was the highest since May almost 4 years ago, and had ease stock decline to just 40% this year.
Tata Steel bounced back from a 44% stock decline last year as the company reported positive figures in its quarterly results. The steel producer recorded an increase of 90.5% to more than INR 1,100 crore for quarter ended June 2013. Sales, on the other hand, dropped 3% to INR 32,550 crore. On the bright side, the company recorded a 11.5% healthy margin. Earnings before income, taxes, depreciation and amortization (EBITDA) in India were at USD258 per tonne and USD43 per tonne in Europe.
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