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Tata Steel Q4 preview: Higher steel prices, low base to boost profitability

Kotak expects profit to rise 266 percent, revenue to see a 40 percent growth and EBITDA to rise 215 percent in Q4 FY21 on a YoY basis.

May 05, 2021 / 08:07 AM IST
File image: Reuters

File image: Reuters

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Tata Steel on May 5 is expected to report robust earnings growth for the March 2021 quarter, driven by higher steel prices and a low base in the year-ago quarter.

According to brokerages, the profit and EBITDA (earnings before interest, tax, depreciation and amortisation) in Q4 FY21 are seen rising in triple digits, while revenue could grow around 40 percent compared to the year-ago quarter.

"We estimate steel realization to increase 14 percent QoQ (up 25 percent YoY) led by higher steel prices in the domestic market, sequential increase in exports and price reset in contracted volumes," said Kotak Institutional Equities which expects volumes to increase 15 percent YoY (flat QoQ) at 3.3 million tonnes given the low base of COVID-19 impacted Q4 FY20.

India EBITDA per tonne is expected to increase by 33 percent QoQ to Rs 26,678 per tonne (up 113 percent YoY) due to higher realizations, the brokerage said.

ICICI Direct also expects Tata Steel to report a healthy performance in Q4 FY21 on the back of strength in steel price.


"For the quarter, we expect Tata Steel's standalone operations to report an EBITDA of Rs 26,000 per tonne (compared to an EBITDA per tonne of Rs 20,070 in Q3 FY21 and Rs 12,531 in Q4 FY20). Standalone operations are expected to report steel sales volume of 3.3 million tonne (MT) while European operation steel sales are likely to come in at 2.5 MT. Additionally, Bhushan Steel is expected to report a sales volume of 1.2 MT," the brokerage detailed.

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ICICI Direct estimates Europe EBITDA per tonne at $87 per tonne primarily led by higher steel prices, while Kotak expects European operations to report an EBITDA per tonne of $100 per tonne.

For Q4 FY21, on a consolidated basis, the topline is expected to increase 41 percent YoY and the consolidated EBITDA is expected to increase 202 percent YoY, said ICICI Direct. Consolidated EBITDA margin is likely to come in at 29.4 percent versus 23.9 percent in Q3 FY21 and 13.8 percent in Q4 FY20.

Kotak expects profit to rise 266 percent, revenue to see a 40 percent growth and EBITDA to rise 215 percent in Q4 FY21 on a YoY basis.

Key aspects to watch out for would be profitability evolution in Europe, consolidated net debt guidance for FY22 and if management prioritizes growth over deleveraging from this point onwards, said Dolat Capital.

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Moneycontrol News
first published: May 5, 2021 08:07 am

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