More Stories

Informist, Wednesday, Oct. 16, 2024

 

By Rajesh Gajra

 

MUMBAI – Lower steel prices are likely to have been a serious drag on the top-line growth of Tata Steel Ltd in the September quarter, but their impact is expected to be partially offset by higher momentum in volume growth. Earlier this month, Tata Steel reported quarterly numbers on its delivery volumes across its factories in India, Netherlands, the UK, and Thailand. Overall volumes grew 7.5% on year to 7.59 million tonnes, much higher than the 3.9% increase in the June quarter.

 

Tata Steel's Managing Director and Chief Executive Officer T.V. Narendran had in a post-earnings analyst call for June quarter warned of margin compression in Jul-Sept due to Chinese exports at very low prices and which steel markets across the world would struggle with. Narendran had also guided for a decline in net realisations from India sales. The company's bottom line for Jul-Sept is seen being dragged down by lower sales realisations, margins, and other non-operating factors.

 

The company's consolidated net profit for the September quarter as estimated by 10 brokerages range widely from a low of a net loss of INR 2.72 billion by ICICI Securities to a high of net profit of INR 10.94 billion rupees by Axis Securities. The INR-10.94-billion estimate by Axis Securities is an outlier because it is over three times the nearest below estimate of INR 3.20 billion by Prabhudas Lilladher. Excluding this outlier, the average estimate for Tata Steel's consolidated net profit is INR 334 million for Jul-Sept, 96.5% down on quarter, and higher than the net loss of INR 61.96 billion posted a year ago.

 

The steel major's consolidated revenue from operations in Jul-Sept is estimated to be INR 511.45 billion, down 8.2% on year and 6.6% on quarter, according to the average of estimates from 10 brokerages. The 8.2% on-year decline, if it pans out when the company reports its Jul-Sept earnings, will be the second consecutive quarter of decline and the worst growth in six quarters. The revenue estimates range from a low of INR 320.81 billion to a high of INR 542.60 billion.

 

Tata Steel's operating profit, as denoted by earnings before interest, tax, depreciation, and amortisation, or EBITDA, is seen at INR 49.08 billion, up 13.7% on year and down 28% on quarter. The 13.7 on-year rise, if it pans out, is higher than the 9.8% increase recorded in the June quarter and 17?ll in the March quarter, indicating improving operating leverage by the company.

 

Brokerage Axis Securities expects Tata Steel's consolidated revenue to decline 5% on year due to lower steel price realisation in India and Europe, partially offset by higher volume. It said the hot rolled coil steel prices in India, excluding the Mumbai market, declined 6% on quarter.

 

Tata Steel's standalone steel realisations are expected to decrease 8.8% on year on account of regional weakness in prices, brokerage Kotak Institutional Equities said in its preview report. Lower realisations will likely cut the company's India EBITDA per tonne by 9.3% on year to INR 12,037 per tonne.

 

Improved European operations may likely have aided Tata Steel's consolidated EBITDA, according to Antique Stock Broking. This, according to the brokerage, will be in the form of shrinkage of the Europe operations' EBITDA loss to INR 9.2 billion from INR 25.1 billion.

 

The company has not yet announced the board meeting date for the approval of its September quarter financial results. Post earnings, analysts will be watching for management commentary on its outlook for steel prices and whether the Chinese steel glut will persist in the current quarter. Updates on the UK blast furnace closure will be also expected, along with updates on capacity expansion in India and capital expenditure.

 

Shares of Tata Steel ended Wednesday at INR 155.24 rupees, 0.3% lower, on the National Stock Exchange.

 

Following are the Jul-Sept consolidated earnings estimates of Tata Steel based on reports compiled by Informist from 10 brokerage houses:

 

Brokerage firm	Net sales	Net profit	EBITDA
	------------(In INR million)----------
Antique Stock Broking Ltd	541,989	-534	44,643
Axis Securities Ltd	529,990	10,940	55,630
Elara Securities (India) Pvt Ltd	533,194	-1,531	46,508
ICICI Securities Ltd	542,152	-2,722	47,134
IDBI Capital Market Services Ltd	537,511	750	46,865
Kotak Institutional Equities	533,809	-1,129	49,384
Motilal Oswal Financial Services Ltd	519,977	-229	46,877
Nuvama Wealth Management Ltd	320,809	2,550	50,007
Prabhudas Lilladher Pvt Ltd	542,600	3,200	53,400
YES Securities (India) Ltd	512,487	2,651	50,305

 

End

 

Edited by Tanima Banerjee

 

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.