Morgan Stanley Retains Tata Steel Rating, Target Price Amid UK Uncertainty

13 Sep, 2024

Morgan Stanley Retains Tata Steel Rating, Target Price Amid UK Uncertainty

Tata Steel Ltd. has been awarded a £500 million grant from the UK government to support the electrification of its arc furnace in Port Talbot, marking a significant development for the company. This funding addresses previous concerns but additional details on project costs and financial support for impacted employees are still needed. Tata Steel has also committed to invest an additional £750 million for the electric arc furnace installation and signed a new Memorandum of Understanding (MoU) with the UK Steel Committee. However, clarity on further costs associated with this MoU remains uncertain.

Morgan Stanley has maintained an 'underweight' rating on Tata Steel's stock and set a target price of Rs 135 per share, suggesting an 8.9% downside from the latest closing price. Despite the grant and new agreements, Morgan Stanley has highlighted concerns including macroeconomic uncertainties, volatile steel prices, and unfavorable demand-supply conditions. The firm's analysis indicates a higher likelihood of a bearish scenario compared to a bullish one.

Tata Steel’s share price has seen a modest increase of 2.88%, reaching Rs 149.93 per share, though it remains subject to market fluctuations. The stock has gained 16.35% over the past year and 7.39% year-to-date, with varied analyst recommendations and an average 12-month target indicating a potential upside of 11.5%.