India’s largest steel producer Tata Steel Limited (Tata Steel) is expected to report a year-on-year decline of 19-32 percent in its consolidated profit after tax (PAT) on July 25, when it will declare its results for the quarter ended June 2022. On a sequential basis, the decline in profit is likely to be more pronounced at 26 – 38 percent.
The revenues are likely to grow 9-16 percent over the same period a year ago. On a sequential basis however, the revenues are seen decreasing by 11-16 percent.
According to a poll of brokerages that Moneycontrol had access to, including Motilal Oswal Financial Services, Kotak Institutional Equities and ICICI Securities, the Tata Group company is expected to report a PAT of Rs 6,000 – 7,200 crore on consolidated revenues of Rs 59,300 – 61,700 crore.
Tata Steel had registered a PAT of Rs 8,907 crore during the corresponding period last year when it had achieved consolidated revenues of Rs 53,372 crore.
Its PAT during the January – March 2022 period stood at Rs 9,756 crore on consolidated revenues of Rs 69,324 crore.
The performance of the company during the quarter was impacted by decline in volumes due to the imposition of export duty as well as increase in coking coal costs which inflated the operating costs.
“We estimate steel realization to increase 4 percent QoQ (+11 percent YoY) led by front-ended price hikes in Q1FY23 and expect volumes to decline 3 percent YoY (-22 percent QoQ) at 3.9 million tons (MT) on lower domestic demand impacted by higher prices and lower exports impacted by imposition of export duties”, a report from Kotak Institutional Equities said.
Consequently, the brokerage expects India EBITDA (earnings before interest, tax, depreciation and amortization) per ton to decline 20 percent QoQ to Rs 18,780/ton (a YoY decline of 44 percent) impacted by higher coking coal costs.
ICICI Securities on the other hand, expect Tata Steel's standalone operations to report an EBITDA/tonne of Rs 20,500/ton (compared to an EBITDA/ton of Rs 23,690/tonne in Q4FY22). It expects European operation steel sales to come in at ~2.16 MT, down 7 percent YoY and 10 percent QoQ.
“For Q1FY23E, we expect European operations to report an EBITDA/ton of $250/tonne as compared to an EBITDA/ton of $241/tonne in Q4FY22”, a report from ICICI Securities said.
Consolidated EBITDA margins for the quarter are likely to come in at 19.0 - 21.1 percent compared to 22.9 percent in the previous quarter and 30.2 percent during the same period a year ago.
The investors will be focusing on the management’s comments on the debt of the company especially after paying of $12.6 billion for the acquisition of Neelachal Ispat Nigam Ltd (NINL). The plan for the revival of NINL will also be in focus along with the timelines for the commissioning of expansion at Kalinganagar plant.
Other points to focus on will be the management’s views on coking coal costs in the coming quarters, contracts from automobile players as well as the export mix.
Tata Steel Ltd opened flat at Rs 935 on July 25 at The National Stock Exchange. In the year 2022, the stock had touched a high of Rs 1,370.75 on April 8 but since then it retraced back to as low as Rs 838.1 on June 22. The stock has seen reversal of trend since then and has appreciated 11.7 percent in the past one month.
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