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Recommendation: Reduce
Target price: Rs124
(Source: IIFL Research)
Tata Steel is likely to post decline in revenue, both sequentially as well as over the year-ago quarter. The company’s provisional steel production for Q2FY23 stood at 7.51 MT and deliveries stood at 7.09 MT; down 3% and 4% over the year-ago quarter, respectively. Tata Steel India’s deliveries stood at 4.91 MT, up 7% over the year-ago quarter and 18% sequentially post-destocking by dealers in Q1FY23 due to falling steel prices. Tata Steel Europe steel deliveries stood at 1.88MT, down 12% both sequentially and year-on-year basis due to the seasonality factor. Thus, weakness in European markets, coupled with falling realization could hit overall revenue, notwithstanding growth in domestic sales volumes.
Weakness in topline could trickle down to margin as well. Tata Steel’s consolidated EBITDA could decline 47% over the year-ago quarter, with rising input costs being another sore point.
Consequently, the company’s Profit After Tax (PAT) could decline 53.13% over the year-ago quarter.
Important management insights to watch out for:
· Profitability and cash flow from European operations
· Update on growth capex
|
Rs. Million |
September 2022 estimates |
QoQ change |
YoY change |
|
Revenue |
552,266 |
(13.93)% |
(12.67)% |
|
EBITDA |
87,426 |
(42.70)% |
(47.00)% |
|
Profit After Tax |
50,318 |
(42.17)% |
(53.13)% |
Source: Brokerage Reports
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