Fundamentally Strong Stock Under 100 Rs
When
it comes to investing in stocks many different types of questions start arriving
in investors mind. Now you might be thinking that is the stock fundamentally
strong for investing, will this stock give me a bumper return in coming decades?
What is the future of this stock? Well today we are going to share a stock
which is fundamentally very strong.
Can
you guess the name of the stock? If yes then let me know in the comment section
below.
Yes,
you are right the stock is none other than Tata Steel.
Key
Data Point’s:
1. The
organization is 115 years old
2. Founded
in 1907 by Sir Jamsetji Tata, Jamshedpur, Jharkhand
3. Tata
steel has presence across 5 continents
4. They
supply steel to major three sector i.e. automotive, construction and general engineering sector
5. Currently Tata steel is one of the largest steel producer of steel in Europe
In the last 115 years Tata Steel build a 20 MTPA capacity but on the occasion of Birth Anniversary of Sir Jamsetji Tata their chairman N Chandrasekaran said that Tata Steel will Double its production in coming decades. As you can see the chart above shows that Tata Steel is trying to increase their flats and longs of steel by 10, 10 MTPA (Metric Tonnes Per Annum) and that is where they are planning to scale up their production to 40 MTPA by the year 2030.
Now you might ask that why Tata Steel
is trying to double its production from 20 MTPA to 40 MTPA.
The reason is very simple as the global hub of metals i.e. China is going to
slow down their production due to environmental concerns.
As the steel sector is one of the biggest
polluters in China, producing around 10% to 20% of carbon emissions in the
country. Beijing has targeted the industry as part of its bid to reduce carbon
emissions and reach net-zero by 2060.
The leading steel manufacturing company of china Hestill
said that “We have no choice (but) to obey the government’s
rules”
Now we have to understand
that which country will be looked after china the answer is obviously India because India is the 2nd largest producer of steel in the world.
Well now as we have understood business model and Economy
of company now let’s focus on the financial performance of company.
Let’s analyze the Profit and Loss statement of Tata Steel:
As
we can see in the above-mentioned P&L statement the sales of company in the
year 2011 was at 118,753 Cr and if we compare this data to current TTM (Trailing
12 Month) it stands at 253,924 Cr. By seeing the above data, we can say that
company has able to doubled its sales in last one decade.
If
we see the net profit of the company in the year 2011 it was at 8,922 Cr and if
we compare this data to current TTM it stands at 39,695 which has grown by almost
8 times. The important thing to notice in Net Profit is that if the companies
net profit stands at 39,695 at the production capacity of 20 MTPA but if
company achieves the target of 40 MTPA production capacity then we can assume
that the level of profitability will increase to a great extent.
Now let’s take a look at Balance Sheet of the
company:
If
we take a look at companies Borrowing in the year 2011 it was at 60,577 Cr which
has almost gone to 116,328 Cr in 2022. But if we see the company has able to
reduce its borrowings from the highest peak i.e. 116,328 Cr to 75,561 in the span
of 2 years. But you may be assuming that the company is going to double its
production in coming years then how will company be able to reduce its
borrowings. The answer is very simple the company has clearly mentioned that “We
are going to fund this majority through internal accrual only”.
Let’s take a look at Cash Flows of the company:
If
we see the cash flow from operating activity then it was at 5,655 in the year
2011 and if we compare this data to current scenario then it stands at 44,381
in 2022.
Considering
the Business Model, Economy and Financial Performance the company is performing
very well.
Now
I hope so all the questions which have arrived in your mind like is the company
fundamentally strong? will company give me bumper returns in upcoming years?
What is the future of the company? are solved now.
Disclaimer: This analysis is purely for educational purpose and
does not contain any recommendation. Please consult your financial advisor
before taking any financial decision.
Source:
https://www.screener.in/company/TATASTEEL/consolidated/#cash-flow
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