Tata Steel 3QFY2014 performance highlights and results update
February 13, 2014, Thursday, 05:28 GMT | 00:28 EST | 10:58 IST | 13:28 SGT
Healthy performance from standalone business continues: Tata Steel’s Indian operations posted a net sales growth of 8.3% yoy to Rs.10,143cr, mainly due to increase in volumes. Volumes increased by 9.5% yoy to 2.0mn tonne. Net steel realizations were flat yoy at Rs.45,198/tonne. The standalone PAT was also up by 45.1% yoy at Rs.1,519cr due to higher other income.
European operations posts healthy operating performance: On a consolidated basis, the company’s consolidated net sales increased 14.4% yoy to Rs.36,736cr (above our estimate of Rs.36,257cr). TSE sales volumes grew by 5.6% yoy to 3.2mn tonne. The European operations reported an EBITDA/tonne of US$44 compared to a loss of US$26 in 3QFY2013 due to better cost control efforts at the European operations. The consolidated EBITDA increased by 79.0% yoy to Rs.4,007cr. However because of higher tax rate of 64.2% due to absence of tax credit in its European operations, the adjusted net profit stood at Rs.502cr (below our estimate of Rs.826cr), compared to a loss of Rs.743cr in 3QFY2013.
Outlook and valuation: We maintain our positive stance on Tata Steel as its earnings growth is likely to be driven by a) higher sales volume in FY2014-16 on the back of 2.9mn tonne brownfield expansion project in Jamshedpur and b) steady improvement in profitability of European operations. We maintain our Buy rating on the stock with a revised SOTP target price of Rs.454.