February 15, 2017 / 15:01 IST
Blended realisations increased by 4.1% QoQ to Rs 41,800/t and were lower than expectations but net raw material costs fell by 13% QoQ and was not only a positive surprise but also largely unexplainable since coking coal costs increased sequentially. Volumes were strong at 3 MT and were propped up by KPO (0.6 MT), while EBITDA/t stood at Rs 11,300/t (vs estimate of Rs 7800/t).
Outlook
We retain Sell on Tata Steel with a revised TP of Rs 410 as we believe that i) strong Q3 performance at standalone operations is unlikely to sustain due to likely pressure on steel prices going ahead and sharp increase in RM costs from unusually low base of Q3, ii) earnings from the residual European operations remain vulnerable to global spreads and iii) material balance sheet deleveraging would remain elusive.
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