ICICI Direct is bullish on Tata Steel has recommended buy rating on the stock with a target price of Rs 550 in its research report dated February 11, 2019.
ICICI Direct's research report on Tata Steel
Tata Steel reported a steady Q3FY19 performance. Indian operations reported sales volume of 3.0 million tonnes (MT) (down 10% YoY, 7% QoQ), lower than our estimate of 3.3 MT. European operations reported steel sales of 2.3 MT (down 4% YoY, flattish QoQ) in line with our estimate of 2.3 MT. Bhushan Steel reported sales volume of 0.92 MT. The consolidated topline came in at Rs 41220 crore (up 23% YoY, down 5% QoQ, in line with our estimate: Rs 41731.7 crore) The consolidated reported EBITDA came in at Rs 6723 crore. For the consolidated operations during the quarter there was forex mark to market loss to the tune of ~Rs 500 crore. Hence, adjusted consolidated EBITDA came in at Rs 7225 crore (our estimate: Rs 7253.2 crore) Standalone reported EBITDA came in at Rs 4549 crore. For standalone operations, during the quarter there was forex mark to market loss to the tune of ~Rs 320 crore. Hence adjusted standalone EBITDA came in at Rs 4872 crore Accordingly, domestic operations reported adjusted EBITDA/tonne of Rs 16404/tonne (vs. Q3FY18: Rs 14025/tonne and Q2FY19: Rs 18856/tonne in line with our estimate of Rs 16500/tonne. Bhushan Steel reported an EBITDA/tonne of Rs 10992/tonne while European operations reported EBITDA/tonne of US$56/tonne (vs. Q3FY18: US$40/tonne and Q2FY19: US$70/tonne, our estimate: US$40/tonne). The company reported a consolidated PAT of Rs 1753 crore.
We maintain our BUY recommendation on the stock. Tata Steel benefits from its integrated operations (100% iron ore and ~35% coking coal) clocking higher EBITDA/tonne vis-à-vis its domestic peers.
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