Tata Steel Ltd (Q4 FY13)

India Infoline News Service | Mumbai |

Tata Steel’s topline increased qoq to Rs346bn, lower than our estimate of Rs365bn.

CMP Rs302, Target Rs380, Upside 25.8% 
  • Consolidated revenue of Rs346bn was lower than estimate of Rs365bn on account of lower realisations in both domestic and Europe divisions

  • Operational performance was above expectations due to an improvement in Europe profitability

  • Standalone operating profit was inline with our estimate led by a decline in other expenditure and higher volumes

  • Adjusted EBIDTA/ton at Corus jumped from -US$26 in Q3 FY13 to US$33 on the back of higher sales volume and lower raw material costs

  • South East Asia operations EBIDTA remained steady on a qoq basis

  • Adjusted for extra-ordinary loss of Rs65.3bn due to goodwill write-down, consolidated PAT stood at Rs8bn

  • Maintain BUY with a revised 9-month price target of Rs380

Result table (Standalone)
(Rs mn) Q4 FY13 Q3 FY13 % qoq Q4 FY12 % yoy
Net sales 346,505 321,071 7.9 339,986 1.9
Material costs (150,684) (139,209) 8.2 (165,645) (9.0)
Power and fuel costs (13,468) (14,431) (6.7) (12,743) 5.7
Personnel costs (48,593) (47,372) 2.6 (47,221) 2.9
Other overheads (90,070) (97,670) (7.8) (82,588) 9.1
Operating profit 43,689 22,390 95.1 31,788 37.4
OPM (%) 12.6 7.0 564 bps 9.3 326 bps
Depreciation (14,696) (14,628) 0.5 (10,931) 34.4
Interest (9,947) (10,323) (3.6) (11,280) (11.8)
Other income (679) 559 - 2,220 -
PBT 18,368 (2,003) - 11,798 55.7
Tax (11,915) (5,685) 109.6 (9,766) 22.0
Effective tax rate (%) 64.9 (283.9)   82.8  
Other prov / minority etc 1,490 256 482.3 2,303 (35.3)
Adjusted PAT 7,942 (7,432) - 4,335 83.2
Adj. PAT margin (%) 2.3 (2.3) 461 bps 1.3 102 bps
Extra ordinary items (74,128) (198) - - -
Reported PAT (66,186) (7,630) 767.4 4,335 -
Ann. EPS (Rs) 32.7 (30.6) - 17.8 83.2
Source: Company, India Infoline Research

Lower realisations in India and Europe led to an underperformance in topline

Tata Steel’s topline increased qoq to Rs346bn, lower than our estimate of Rs365bn. Lower realizations in the European and domestic market led to the underperformance in topline. Standalone Indian operations reported an increase of 20.6% qoq and 29% yoy in sales volume to 2.28mn tons. Sales volume at its European operations too increased by 13.2% qoq to 3.48mn tons, higher than our estimate of 3.25mn tons. The jump in volumes was due to the restart of the Port Talbot blast furnace. Volumes at its South Asian units decreased marginally by 2.4% qoq to 0.8mn tons. Average blended realizations in India decreased sharply by 4.7% qoq in rupee terms against our expectation of an increase of 2%. Realisations in Europe too decreased by 6.6% qoq from Rs60,020/ton in Q3 FY13 to Rs56,041/ton in Q4 FY13. Realizations at its South East Asia increased by 3.1% qoq to Rs43,575/ton after a sharp fall in Q3 FY13.


Domestic operations continue to report strong EBIDTA/ton

Tata Steel India registered a strong growth of 30.8% qoq and 10.4% yoy in operating profit to Rs33bn, inline with our estimate. The impact of lower blended steel realisation on operating profit was offset by a decline in power costs and other expenditure. Blended realizations in the domestic operations declined by 4.7% qoq against our expectation of a marginal increase. Total costs per ton of steel declined by 9.6% qoq more than offsetting the decline in realizations. Except Raw material costs, all other costs declined on a per ton basis sequentially. Power costs per ton declined 25.5% qoq due to an increase in captive power production and reversal of provisions. Other expenses per ton too were lower on a qoq basis by 21.3% on account of lower forex losses, reduced conversion charges at FAMD unit and reduction in royalty. Raw material costs per ton surprisingly increased on a qoq basis by 6.2%. Operating profit per ton for the domestic operations increased by 8.4% qoq to Rs14,491/ton.


Blended per ton cost analysis (Standalone)
  Q4 FY13  Q3 FY13 % qoq Q4 FY12 % yoy
Steel production (mn tons) 2.07 2.07 - 1.78 16.5
Steel sales (mn tons) 2.28 1.89 20.6 1.77 29.0
Sales as a % of production 110.1 91.3   99.5  
Net realisations (Rs/ton) 47,239 49,578 (4.7) 53,617 (11.9)
Cost per ton (Rs/ton)          
RM/ton 13,653 12,861 6.2 13,568 0.6
Staff cost 4,542 4,677 (2.9) 5,296 (14.2)
Power and fuel costs 2,462 3,304 (25.5) 2,603 (5.4)
Other expenditure 12,092 15,371 (21.3)
BSE 682.10 [7.10] ([1.03]%)
NSE 680.85 [9] ([1.30]%)

***Note: This is a NSE Chart

 

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