Motilal Oswal's research report on Tata Steel
On a standalone basis, revenue/EBITDA/APAT grew 73%/33%/40% YoY to INR367b/INR122b/INR79b in 4QFY22. Revenue and EBITDA were broadly in line, while APAT was 9% above our estimate, led by a marginal 4% beat on EBITDA, lower-than-estimated finance cost, as well as higher other income. On a consolidated basis, TATA reported a revenue/EBITDA/APAT of INR693b/INR150b/INR100b in 4QFY22, up 39%/6%/31% YoY. The consolidated result was in line as other segments and forex adjustments offset the beat in its European result. One-time provisioning of INR13.4b (INR5.4b towards inventory write-off and INR8b towards shortfall in meeting its mining dispatch target after the acquisition of mines) was made in other subsidiaries. TSE’s (Tata Steel Europe) earnings were a surprise, with an EBITDA/t of USD241 (est. USD178), even though ASP was in line. TSE continues to ride the steel price boom in Europe after the ban on steel exports from Russia and unavailability of steel from Ukraine.
Outlook
The stock trades at 4.3x/4.4x our FY23/FY24 EV/EBITDA estimate. On a P/B basis, the stock is quoting 1.2x/1.1x our FY23/FY24 estimate. We maintain our Neutral rating with a revised SoTP based TP of INR1,440 share (from INR1,500 earlier).
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