The stock of Tata Sponge is currently quoting at around Rs.777, which is nearly 33% below its high price last year.

Q4 results highlights

Net sales for the quarter were higher by 4% at Rs.254 crore but the net profits were down by 48% at Rs.24 crore in the fourth quarter. The reasons have been a very sharp rise in the input costs, which essentially accounted for the entire fall in profit. This came from higher prices of ore, which have gone up sharply in the last months on the back of rising demand.

Is it worth buying at this price?

Even with the lower EPS (down by nearly half), the stock is available at a P/E ratio of 8.8 times of rolling profits. That is a healthy valuation to buy into. We expect the pressure of input costs to remain but at the current valuations of 8.8X, the downside risk is not too much to worry about. Traders can look at this stock as a short term trade with targets of Rs.850 in the short term.