Finding low PE stock of a quality company can be a nightmare as stocks of top Indian business houses trade at a premium. So in this article, we will see a TATA group stock with a low PE of 7, and investors can get a dividend yield of 5% if they buy the shares now.
Only a handful of people in India have not heard the name Tata Steel. With a market cap of Rs. 1.24 Lakh Crore, Tata Steel is the 39th largest company listed on the Indian stock market.
We have little to no space for doubting the company’s or the management’s quality. Because in India, the words Trust and Tata are synonymous.
Tata Steel Share Price Performance
On Friday, 27th March 2023, shares of Tata Steel started trading at Rs. 102.55/- and closed at Rs. 102.30/- per share, up 20 Paise from the previous day’s close of Rs. 102.10/-.
On 23rd June 2022, shares of Tata Steel hit its 52 Week Low of Rs. 82.70/-. And on 6th April 2022, Tata Steel’s stock price reached its 52 Week High of Rs. 138.67/-. (Prices adjusted for Stock Split/Bonus)
Shares price of Tata Steel is down Rs. 1.65/- or 1.59% on the monthly chart. On 28th February ’23, the closing price of Tata Steel stock was Rs. 103.95/-.
On the yearly chart, the stock price of Tata Steel is down Rs. 31.60/- or 23.60%. On 28th March 2022, shares of Tata Steel closed the trading day at a post-split price of Rs. 133.90/-.
On a Year to Date basis, the share price of Tata Steel is down by 14.21% or Rs. 16.95/-. On 2nd January 2023, the stock price of Tata Steel closed at Rs. 119.25/-.
Low PE Of Tata Steel Shares
After the company reported its Dec ’22 quarterly result, the Trailing 12-Month (TTM) Earning Per Share (EPS) stood at Rs. 13.77/-.
On dividing the current closing share price of Tata Steel, which is Rs. 102.30/- per share, by the Trailing 12-Month EPS, we get the P/E value of 7.43.
Compared to some big names in the Metal and Steel Industry, like JSW Steel, which has a PE of 43.52, SAIL, which has a PE of 10.27, and Apollo Tubes, which is trading on an enormous PE value of 54.74, Tata Steel’s PE of 7.43 is relatively low.
Why Is The Share Price Of Tata Steel Falling?
In a recent statement, T.V. Narendran, the Chief Executive Officer (CEO) of Tata Steel, said – “Recession concerns weighed on steel prices, which coupled with elevated energy costs affected our performance while steel prices were subdued in India, European operations witnessed margin compression due to lower realisations and elevated input costs.”
The Q3FY23 quarterly result of Tata Steel didn’t help the cause. The company reported a Net Loss for the quarter against Rs. 9,572/- Crore profit on a Y-o-Y basis, which affected the market sentiment.
Return On Investment Of Rs. 1 Lakh In Tata Steel Shares
If an investor had bought shares of Tata Steel worth Rs. 1 Lakh a month ago, it would have fetched 962 shares. And after a month, the value of that 1 Lakh investment would have gone down to Rs. 98,412.60/-.
An investment of 1 Lakh Rupees a year ago would have fetched 74 shares of Tata Steel. Because the share price of Tata Steel on 28th March 2022 closed at Rs. 1,338.95/-.
And on 28th July 2022, shares of Tata Steel started trading ex-split. The stock split of Tata Steel was on the ratio of 1:10. Meaning, One share of Tata Steel would be divided into Ten new shares. And the stock price would also be divided on the same ratio.
So the 74 shares of Tata Steel post the ex-split date would become 740 shares. And after a year, the investment of Rupees 1 Lakh in Tata Steel has devalued to Rs. 75,702/-.
But the investor would have earned a small profit of Rs. 3,774/- in the form of a dividend. On 4th May 2022, the board of Tata Steel declared a dividend of Rs. 51/- per share. And at the current share price of Tata Steel, a dividend of Rs. 51/- (or Rs. 5.1/-, adjusted for a 1:10 Stock Split) implies a dividend yield of 4.98%.
But an investment of Rs. 1 Lakh in Tata Steel 5 years ago would have fetched 175 shares at Rs. 571.05/- a piece. And post the Tata Steel Stock Split on 28th July 2022 on the ratio 1:10, 175 shares would have become 1750 shares of Tata Steel.
And as of 27th March 2023, 1750 shares of Tata Steel is worth Rs. 1,79,025/-. The investment of 1 Lakh Rupees in Tata Steel 5 years ago has appreciated by 79.14%.
Holding those shares of Tata Steel for five years, the investor would also have earned an extra profit of Rs. 19,075/- in the form of dividends.
Tata Steel Dividend History (2018 – 2022)
|Ex-Dividend Date||Tata Steel Share Price||Dividend Amount||Dividend Yield|
|05th July 2018||Rs. 553.30/-||Rs. 10/-||1.80%|
|04th July 2019||Rs. 495.30/-||Rs. 13/-||2.62%|
|06th August 2020||Rs. 400.45/-||Rs. 10/-||2.49%|
|17th June 2021||Rs. 1,103.75/-||Rs. 25/-||2.26%|
|15th June 2022||Rs. 959.55/-||Rs. 51/-||5.31%|
Is This The Right Time To Buy Tata Steel Shares?
According to Motilal Oswal, the Target Price of Tata Steel stock is Rs. 115/-. Investors can expect a maximum profit of 12.41% if they invest in shares of Tata Steel now.
In a recent research report, Motilal Oswal said – “The stock is trading at 1.1x FY24E P/B, with 16% RoE expectations, which we believe is pricing in the downside as well. The stock is available at 6.1x/4.6x FY23E/FY24E EV/EBITDA, which looks optimally priced at mid-cycle valuations. We trim our FY24 EBITDA estimate by 5%, factoring in cost pressures and the macro-economic scenario in Europe.”
The brokerage firm also mentioned – “We reiterate our Neutral rating on the stock and lower our SoTP-based TP to INR 115 (v/s INR123 previously).”
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