Tata Steel’s Q3FY25 performance reveals a mixed bag of financial results, marked by a 36.37% YoY decline in net profit and a 3.01% drop in revenue. Despite these setbacks, the company exceeded analyst expectations by outperforming revenue forecasts and avoiding the predicted net loss. The company remains optimistic, with strong operational cash flow, reduced debt, and growing deliveries in India. Brokerages have expressed positive or neutral ratings, citing long-term growth potential driven by sustainability initiatives and enhanced capacity utilization.

Brokerage Recommendations: Optimism for the Long Term

Several top brokerage firms have reiterated their positive outlook on Tata Steel, with most maintaining or increasing their price targets.

JP Morgan: Maintained an Overweight rating with a target price of Rs 155.
Jefferies: Retained a Buy rating, forecasting the share price to reach Rs 160.
Morgan Stanley: Assigned an Equal-weight rating and also projected a target of Rs 160.
The consensus highlights favorable long-term prospects despite near-term global challenges, emphasizing Tata Steel’s market leadership and diversified operations across multiple geographies.

Q3FY25 Financial Performance: Revenue Decline but Better-than-Expected Results

Tata Steel reported a net profit of Rs 326.64 crore for Q3FY25, down 36.37% YoY from Rs 513.37 crore in the same quarter last year. The consolidated revenue fell by 3.01% YoY to Rs 53,648.30 crore.

Key Highlights:

Revenue exceeded the Bloomberg consensus estimate by 3%, despite analyst expectations of a net loss for the quarter.
On a quarter-on-quarter (QoQ) basis, revenue dipped slightly by 0.48%, while net profit saw a steep 60.81% decline.
The company faced subdued steel prices, which weighed on margins. However, higher deliveries in India, coupled with tight working capital management, helped mitigate some of the negative impact.

Operational Highlights: Rising Domestic Deliveries

Tata Steel’s operational performance in India displayed resilience despite a global slowdown.

Deliveries in India:

For Q3FY25, Tata Steel recorded an 8% YoY increase in deliveries to 5.29 million tonnes.
For the first nine months of FY25 (9MFY25), total deliveries rose 6% YoY to 15.3 million tonnes.
The domestic market remains a core growth driver for Tata Steel, benefitting from government infrastructure projects and industrial demand recovery.

Management's Outlook: Navigating Global Challenges

Tata Steel’s management acknowledged the difficult macroeconomic environment, citing ongoing geopolitical instability and sluggish economic growth in key regions.

CEO & MD T.V. Narendran's Comments:
Narendran stated, “The global operating landscape continues to be shaped by geopolitics and continued economic slowdown in key regions. Subdued steel prices continued to weigh on our performance. We are progressing on enhancing sustainability in our operations at all our sites and on our commitment to diversity and inclusion.”

The company remains committed to sustainability initiatives, aiming to reduce carbon emissions and increase renewable energy use in its manufacturing facilities.

CFO Koushik Chatterjee's Insights:
Chatterjee provided financial highlights, including:

Cash flow from operations: Rs 8,253 crore for the quarter.
Capital expenditure: Rs 3,868 crore.
Net debt reduction: By Rs 3,000 crore QoQ, bringing total debt down to Rs 85,800 crore.
Group liquidity: Rs 28,219 crore, with Rs 13,119 crore in cash and cash equivalents.
These figures underscore Tata Steel’s focus on deleveraging, which enhances financial flexibility amidst global economic uncertainties.

Performance Overview: Key Financial Metrics

Tata Steel’s current market valuation and performance metrics reflect mixed results due to external headwinds. The stock has a P/E ratio of 60.09 and a dividend yield of 2.73%, indicating that the market values its long-term potential despite short-term profit pressures.

Technical Analysis: Price Trends and Key Levels

Tata Steel’s stock has shown signs of consolidation, reflecting a balance between buying and selling pressure.

Technical Analysis: Candlestick Patterns

A review of Tata Steel’s daily candlestick chart reveals a Bullish Harami formation near the Rs 130 level, indicating that the selling pressure may be weakening. The stock has been consolidating in a narrow range, awaiting a catalyst for a breakout.

Key Takeaway:
A sustained close above Rs 133 could confirm bullish momentum, potentially targeting Rs 140 in the near term.

Fibonacci Retracement Levels

Using the 52-week high of Rs 184.60 and the 52-week low of Rs 122.62, the Fibonacci retracement analysis identifies key price levels for support and resistance.

38.2% Retracement: Rs 148.23
50% Retracement: Rs 153.61
61.8% Retracement: Rs 158.99
The stock is currently trading near lower retracement levels, suggesting a potential accumulation zone for long-term investors.