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Tata Steel 3QFY2013 performance highlights and results update

Contributed by Angel Broking

Higher input costs dent standalone results: Tata Steel’s Indian operations posted a net sales growth of 12.8% yoy to Rs.9,370cr led by higher volumes. However EBITDA fell by 1.1% yoy to Rs.2,526cr and EBITDA margin slipped 379bp yoy due to higher costs of raw material, power and staff costs. Interest and depreciation charges increased by 152.0% and 50.1% yoy to Rs.509cr and Rs.434cr, and as a result the company’s standalone PAT fell by 26.4% yoy to Rs.1,046cr.

Disappointing consolidated results: The company’s consolidated net sales fell by 3.0% yoy to Rs.32,107cr due to weak financial performance from Tata Steel Europe (TSE) where volumes declined by 9.9% yoy to 3.0mn tonne; EBITDA/tonne was US$(26) for TSE. The interest cost in the quarter increased by 46.0% yoy to Rs.1,032cr and depreciation increased by 25.7% yoy to Rs.1,463cr. Hence, the company reported an adjusted net loss of Rs.743cr at the consolidated level.

Outlook and valuation: Despite weak 3QFY2013 results, we maintain our positive stance on Tata Steel owing to its buoyant business outlook, driven by a) higher sales volume in FY2014-15 on the back of 2.9mn tonne brownfield expansion project in Jamshedpur, b) raw-material projects at Mozambique and Canada and c) restructuring initiatives at TSE. We maintain our Buy rating on the stock with a revised SOTP target price of Rs.443.