May 26, 2012, 12.35 PM | Source: Moneycontrol.com
Way2Wealth has recommended an underperformer rating on Tata Steel in its May 22, 2012 research report.
, Way2Wealth |
“Tata Steel has reported consolidated sales volume of 6.22mnt including 1.77mnt from domestic operations and 3.3mnt from European operations. Realisation for the quarter stood at $1006/t in domestic market and $1152/t in European operations. Total deliveries for FY12 were 24mnt. Standalone EBITDA/t of the firm is reported at $331/t which is impacted by `167cr forex losses and `257cr towards employee wage provision as earlier wage agreement expired in December 2011. EBITDA/t at Corus operations is reported at $8/t as against $85/t reported in Q4FY11. Profitability at European operations is below expectations as firm could not take advantage of improved steel prices during the quarter due to earlier contracts. We expect partial benefit to flow in this quarter. South East Asian operations reported turnover at $620mn and EBITDA at $21mn. Operating profit for the quarter stood at `3178cr at consolidated level as against `4466cr for Q4FY11. PAT is reported at `433cr. PAT is impacted due to high interest cost of `1130cr which also includes `58cr prepayment penalty.”
“Tata Steel has commissioned 3mnt Jamshedpur plant during the quarter. The firm has commissioned Blast Furnace and Steel Melting Shop at these facilities whereas, it is planning to commission coke oven facilities in November 2012. The plant is likely to add 1mnt to its deliverable volume in FY13E. The firm has given aggressive capex guidance of $2.4bn in FY13E which includes $600mn spend on its European operations, $400-500mn on Jamshedpur expansion, $800mn on Orissa expansion and $300mn towards maintenance capex and various other raw material expansion projects. For European operations the firm has given capex guidance of $600mn mainly towards reduction in COP. Firm has guided towards Euro 200mn savings in FY13E in European operations.”
“We expect firm to post sales volume of 7.83mnt in domestic operations. As part of restructuring Port-Talbot furnace will remain shut for four months starting from June 2012. We expect this to have impact on deliveries from European operations. We expect firm to post 13.5mnt volumes in European operations. Raw material prices are expected to ease off during FY13E however, weak demand outlook is likely to put pressure on margin. We expect domestic operations to post EBITDA/t of $310/t and European operations to post EBITDA/t of $10/t for FY13E. We expect firm to post EPS `46 for FY13E. At current market price the stock is trading at 8.5xFY13e earnings and 6xFY13e EBITDA. We maintain “Underperform”,” says Way2Wealth research report.
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