Tata steel reported below expected numbers for Q1FY20. The revenue grew by 1.3% yoy but declined by 15.3% qoq to Rs35,947cr against median consensus estimates of Rs37,404cr. EBITDA stood at Rs5,377cr, down 15.4% yoy and 28.4% qoq against median consensus estimate of Rs5,534cr. EBITDA margin contracted by 294bps yoy and by 275bps qoq to 15%. Reported net profit (including discontinued operations and after non-controlling interest) came in at Rs711cr vs. median consensus estimates of Rs1,459cr. Reported PAT decline was 63.6% yoy and 70.2% on qoq basis.
Revenue growth was impacted on account of lower realisations across geographies which more than negated the 5% yoy growth in deliveries. Consolidated production grew by 11% yoy. EBITDA was impacted on account of pressure on spreads in Tata Steel Europe (TSE).
India steel production grew by 23% yoy to 4.50 MT in Q1FY20 with consolidation of Tata Steel BSL for the full quarter and higher capacity utilization at both Tata Steel Standalone and Tata Steel BSL.
India steel deliveries jumped 19% yoy to 3.96 MT in Q1FY20 as slowdown in the automotive sector was countered by higher sales in other segments. Industrial Products and Projects and Branded Products and Retail volumes increased by 26% yoy and 20% yoy.
Standalone revenue came in at Rs16,091cr vs. Rs16,405cr in QFy19. EBITDA/Tonne came in at Rs14,218 vs. Rs17,677 in Q1FY19.
Tata Steel BSL production and deliveries were up by ~140bps yoy/126bps yoy respectively. On qoq basis, production grew by ~9% and deliveries declined by ~25%. Sequential production was higher driven by higher mill availability while deliveries were impacted by sluggish demand.
TSE steel production and deliveries declined by ~6% yoy and ~8% yoy respectively. Q1FY20 deliveries were lower amidst sluggish demand environment; production was impacted by planned shutdowns and unplanned outages. TSE EBITDA/Tonne was drastically lower at Rs277 vs. Rs6,794 in Q1FY19 on account of pressure on steel spread amidst increase in raw materials costs, import pressure and lower steel prices.
PAT was impacted on yoy basis due to 1) adoption of Ind AS116 resulting in higher depreciation, 2) lower other income (Rs251cr vs.Rs353cr), 3) higher interest outgo (Rs1,806cr vs.Rs1,658cr) and 4) higher effective tax rate.
Tata Steel Ltd ended at Rs. 381.80, down by 19.05 points or 4.75% from its previous closing of Rs. 400.85 on the BSE.
The scrip opened at Rs. 395.80 and touched a high and low of Rs. 396.50 and Rs. 377.95 respectively. A total of 1,41,91,107 (NSE+BSE) shares were traded on the counter. The stock traded above its 200 DMA.
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