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Informist, Monday, Jul 22, 2024

 

By Rajesh Gajra

 

MUMBAI – A sequential fall in India volumes is likely to bring down Tata Steel Ltd's consolidated topline for the quarter ended June, but higher sales realisations would lead to higher operating profit. The company's bottomline will reflect the mixed impact of topline and operating profit.

 

On an annual basis, the revenue is likely to have been lower in Apr-Jun due to subdued India volumes, but lower input costs are expected to lead to higher operating profit, as denoted by the earnings before interest, tax, depreciation, and amortisation. The net profit will track the operating profit growth.

 

For Apr-Jun, the company is expected to report consolidated revenue of 575.54 bln rupees, down 1.9% on quarter and 3.3% over the year-ago period, as per the average of the estimates of eight brokerage firms. These estimates range from 545.28 bln rupees to 592.42 bln rupees.

 

The consolidated net profit is seen at 10.6 bln rupees, with the estimates ranging from 8.6 bln rupees to 17.25 bln rupees. But the estimates include an outlier of 17.25 bln rupees by brokerage IDBI Capital. Excluding this, the estimates range from 8.6 bln rupees to 11.9 bln rupees, with an average of 9.65 bln rupees, up 52% on year. Compared to the adjusted net profit, after excluding one-off items of the previous quarter, the estimate of 9.65 bln rupees is sequentially lower by 20%.

 

The EBITDA is seen ranging from 59.28 bln rupees to 67.07 bln rupees, with an average of 62.43 bln rupees, up marginally by 0.3% on quarter and 2.4% over the year-ago period.

 

Earlier this month, Tata Steel reported its quarterly production and delivery volume numbers for the June quarter, which showed the India delivery volume of crude steel declining sequentially by 8.9% and rising 3.1% on year to 4.94 mln tn. In its overseas operations, liquid steel delivery volume in Apr-Jun was 1.52 mln tn in the Netherlands and 0.69 mln tn in the UK. Volume growth in the Netherlands was 6.3% over the previous quarter and 10.9% on year, while that in the UK was flat sequentially and down 8% on year.

 

In line with the sequential fall in India volume, brokerage IDBI Capital expects Tata Steel's topline to fall 7% on quarter "led by domestic operations". On the other hand, YES Securities estimates a marginal increase of 0.6% in revenue on quarter due to higher realisations. On India steel sales, brokerage Kotak Securities Institutional Equities Research said Tata Steel's realisations are likely to have gone up marginally by 0.3% over the previous quarter "on account of product mix".

 

The company's India EBITDA is seen declining 4.2% on quarter by YES Securities and by a higher rate of 12% on quarter by brokerage Nuvama Wealth Management. The company's India EBITDA per tn is seen falling 9% by Kotak Institutional Equities on a sequential basis. Compared to the year-ago period, the consolidated EBITDA margin is seen expanding by 100 bps to 11% by YES Securities due to "reducing coking coal costs and steady HRC (hot rolled coil) prices".

 

Tata Steel is yet to announce the date for its board meeting for the approval of its June quarter earnings. In the earnings announcement, investors are likely to look for the management's update on closure of the UK blast furnace, profitability and cash flow from European operations, and progress in capacity expansion, according to IDBI Capital.

 

At 1018 IST, shares of Tata Steel were down 0.8% at 159.15 rupees on the National Stock Exchange.

 

Following are the Apr-Jun consolidated earnings estimates of Tata Steel based on reports compiled by Informist from eight brokerage houses:

 

Brokerage firm	Net sales	Net profit	EBITDA
	-------(In mln rupees)-------
Axis Securities Ltd	592,420	11,900	59,280
Elara Securities (India) Pvt Ltd	572,608	9,578	61,007
IDBI Capital Market Services Ltd	545,280	17,249	67,069
Kotak Institutional Equities	579,319	8,774	61,434
Motilal Oswal Financial Services Ltd	580,000	10,000	60,000
Nuvama Wealth Management Ltd	584,100	8,600	66,000
Prabhudas Lilladher Pvt Ltd	560,200	8,700	59,700
YES Securities (India) Ltd	590,407	9,983	64,936
Average	575,542	10,598	62,428

 

End

 

Edited by Avishek Dutta

 

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