Earnings Outlook
Price hikes, breakeven in Europe may aid Tata Steel Q1 PAT
This story was originally published at 16:24 IST on 28 July 2025
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By Avishek Rakshit
KOLKATA – An improvement in price realisation on a trailing basis after the imposition of the 12% safeguard duty to protect the Indian steel industry and moderating coking coal prices are expected to benefit all steel companies in the country in the June quarter including Tata Steel Ltd. This is despite analysts' projection that the steel industry lost sales volumes during the June quarter and global prices remaining weak.
Tata Steel is expected to have benefitted from higher domestic prices and its operations in the UK are also estimated to have reached break even. This dual benefit may lead Tata Steel's consolidated net profit for the June quarter to rise sharply by over 76% on year and by nearly 30% on quarter to INR 16.9 billion, according to the average of estimates from 11 brokerages. However, the consolidated revenue is expected to drop by over 6% on year and around 9% on quarter to INR 514.2 billion, according to the estimates. Although Tata Steel may benefit from higher price realisations, lower sales volume may offset the gain to some extent.
Anand Rathi Share and Stock Brokers Ltd. is the most bullish on the company's net profit and estimates it the highest at INR 19.4 billion. However, Anand Rathi is the least bullish on the company's revenue and estimates it the lowest at INR 493.4 billion. YES Securities (India) Ltd. projects the profit the lowest among the brokerages at INR 14.9 billion and JM Financial Institutional Securities Pvt. Ltd. has the highest estimate of INR 542.1 billion for sales. Tata Steel will declare its results for the June quarter on Wednesday.
Tata Steel had reported a consolidated net profit of INR 9.6 billion in the year-ago quarter and INR 13.0 billion for the March quarter. Its consolidated revenues were INR 547.7 billion and INR 562.1 billion for the year-ago quarter and the March quarter, respectively.
In a report on the Indian steel sector, HDFC Securities Ltd. said that during the June quarter, prices of domestic hot-rolled coil flats and rebar long category of steel rose by 6.6% and 4.4%, respectively, after the government imposed a 12% safeguard duty on steel imports. Pick-up in construction during the June quarter also led to a surge in prices. IDBI Capital Market Services Ltd. is of the view that domestic steel prices increased by INR 3,104 per tonne, mainly due to the safeguard duty.
On the other hand, prices in China fell by 4% on quarter to an eight-year low on subdued demand and the continuing global oversupply, and the effects of this were felt globally including in Europe. Tata Steel has operations in the UK and the Netherlands. As a result, while the steelmaker may see incremental price improvement in India, the same may not apply to its European operations.
However, it is on sales volume that Tata Steel, like its peers, may take a hit. HDFC estimates aggregate sales volume for the country's top steelmakers, including Tata Steel, may have fallen 12% on a trailing basis due to moderation in demand. Usually, construction peaks in the winter, which coincides with the latter part of the Oct-Dec quarter and the first half of the March quarter. Construction falls in the summers due to heat, humidity, and unseasonal rains which affects the June quarter performance, and construction hits it lowest during the monsoons which coincides with the September quarter.
At the same time, Tata Steel and other steel companies are likely to benefit from moderating production costs. According to IDBI, average coking coal prices fell 2% on quarter while domestic iron ore prices increased by 4% on a trailing basis to an average of INR 7,335 per tonne, before declining to INR 6,900 a tonne by the end of the June quarter. Although the full benefit of input cost movements is likely to be reflected in the upcoming quarter, Tata Steel is expected to have benefitted to some extent on its production costs in the June quarter itself, brokerages said.
Nuvama Wealth Management Ltd. is of the view that Tata Steel's standalone earnings before interest, tax, depreciation, and amortisation per tonne of sales--a barometer of the company's standalone profitability, is expected to increase by INR 1,867 on quarter to INR 14,569 for the June quarter. This is on account of the rise in blended steel realisation per tonne of sales by INR 2,500 per tonne and decrease in coking coal cost by $10 per tonne. Nevertheless, Tata Steel's sales volume is likely to decline by 15% on quarter to around 4.8 million tonnes owing to a shutdown for scheduled plant maintenance and muted export demand, Nuvama said.
According to Kotak Institutional Equities, Tata Steel's European operations is likely to break even with $2 per tonne EBITDA arising from a combination of $48 per tonne EBITDA from its Dutch operations and reduced losses in the UK during the June quarter.
An improvement in EBITDA per tonne of sales from its Indian operations and an overall breakeven in its European plants may lead Tata Steel to report a consolidated EBITDA growth of 2.1% on year, and nearly 3% on quarter, at INR 69.6 billion for Apr-Jun, according to the average of estimates from 10 brokerages.
On Monday, shares of Tata Steel closed 1.1% lower at INR 159.68 on the National Stock Exchange. Tata Steel's shares have risen 7.9% since it reported its March quarter earnings. Ten brokerages have a 'buy' rating on Tata Steel at an average target price of INR 178 and four brokerages have a 'hold' rating at an average target price of INR 150.
Following are the Apr-Jun earnings estimates for Tata Steel based on reports from 11 brokerage firms in the descending order by the estimate of net profit:
|
Broker Name |
Net Sales (in million rupees) |
Net Profit (in million rupees) |
EBITDA (in million rupees) |
|
Anand Rathi Share and Stock Brokers Ltd |
4,93,374.00 |
19,448.00 |
|
|
JM Financial Institutional Securities Pvt Ltd |
5,42,076.00 |
17,891.00 |
70,472.00 |
|
Kotak Institutional Equities |
5,05,148.00 |
17,734.00 |
73,610.00 |
|
Prabhudas Lilladher Pvt Ltd |
5,06,900.00 |
17,500.00 |
70,300.00 |
|
IDBI Capital Market Services Ltd |
5,03,420.00 |
16,957.00 |
69,856.00 |
|
HDFC Securities Ltd |
5,07,810.00 |
16,890.00 |
66,130.00 |
|
Nuvama Wealth Management Ltd |
5,16,913.00 |
16,798.00 |
71,795.00 |
|
Antique Stock Broking Ltd |
5,31,666.00 |
16,132.00 |
70,909.00 |
|
Motilal Oswal Financial Services Ltd |
5,00,600.00 |
15,800.00 |
69,600.00 |
|
Systematix Shares and Stocks (India) Ltd |
5,07,000.00 |
15,800.00 |
64,100.00 |
|
YES Securities (India) Ltd |
5,41,164.00 |
14,856.00 |
69,468.00 |
|
Average |
5,14,188.27 |
16,891.45 |
69,624.00 |
End
Edited by Ashish Shirke
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