Tata Steel Q1 Preview: EBITDA likely to improve, boosted by India, Europe operations

Revenue likely to fall 1.6 percent quarter on quarter while 3 percent year on year to Rs57728 crore while net profit year on year likely to rise 262 percent to Rs 1025 crore from Rs 283 crore a year ago

Tata Steel Ltd is expected to report a year-on-year surge in operating profit for June quarter, driven by better performance in its standalone Indian operations and reduced losses in Europe. The company's bottom line quadrupled, driven by enhanced operating profit. The firm will report earnings on July 31.

According to 10 average brokerage estimates polled by Moneycontrol, EBITDA is likely to be at Rs 6318 crore, up 22 percent year on year. On a QoQ basis, EBITDA is likely to decline by 4 percent, led by lower sales volumes in India.

Revenue is likely to fall 1.6 percent quarter on quarter while it could rise 3 percent year-on-year to Rs 57,728 crore. On an annual basis, net profit is likely to rise 262 percent to Rs 1,025 crore from Rs 283 crore a year ago. Meanwhile, net profit is likely to drop 15 percent on a sequential basis.

Tata Steel's Q1FY25 production report shows Tata Steel India sales at 4.94 MT, down 9 percent QoQ (up 3 percent YoY) compared to the strong Q4FY24. Europe sales remained strong at 2.21 MT, up 4.2 percent QoQ/YoY, driven by normal operations in the Netherlands. Consolidated sales volume fell 5 percent QoQ (up 4 percent YoY) from the strong Q4FY24. Steel HRC prices in Mumbai were down 6 percent YoY and flat QoQ.

Axis Securities forecasts a 10 percent QoQ decline in India EBITDA per ton, to Rs 14,077/t (up 4 percent YoY), due to reduced operating leverage from lower sales volumes. In Europe, EBITDA per ton loss is expected to narrow YoY to $37/t from $96/t in Q1FY24, with no significant change QoQ. The Netherlands is expected to report positive EBITDA, while the UK remains weak.

What factors could drive the earnings?

EBITDA performance: Analysts anticipate an EBITDA loss of Rs 520 crore in Europe, compared to an EBITDA loss of Rs 1,570 crore in Q1FY24. Tata Steel's European operations will improve, primarily driven by the recovery in Tata Steel Nederland’s (TSN) operation with ramp-up of volume, analysts added.

Consolidated revenue: Some analysts predict a slight 1 percent QoQ increase in consolidated revenue (down 0.4 percent YoY), driven by higher steel price realization in India and the Netherlands, though partially offset by lower steel sales volumes.

EBITDA per tonne: Analysts expect India's EBITDA per tonne to decline QoQ due to lower operating leverage from reduced sales volumes. In Europe, EBITDA per tonne losses are projected to narrow YoY, staying roughly flat QoQ. The Netherlands is anticipated to achieve positive EBITDA, while UK operations are expected to remain weak.

Key things to look for

Analysts will closely monitor updates from management on the UK blast furnace closure, profitability and cash flow from European operations, and progress in capacity expansion.

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