Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Steel--3Q: Strong India; Weak Corus
Tata Steel’s 3Q consol recurring net profit at Rs10.2 bn was up 43% YoY and
in-line with estimates. Tata Steel India surprised positively with ASPs rising
6% QoQ and driving a 7% EBITDA beat. Corus’ results were expectedly weak
with EBITDA (60% of which was carbon credit sales) dropping 55% QoQ.
Tata Steel will see margins expand in both India and Corus over the next two
quarters as steel prices have risen across regions ahead of the cost push. Post
3Q results, we see some upside to our India profit forecasts. Maintain BUY.
Strong India results led by robust ASPs
3Q standalone net profit at Rs15bn was up 23% YoY and 7% above estimates.
While volumes dropped 1% QoQ, ASPs were up a strong 6% QoQ despite weak
domestic prices due to a better product-mix. Steel business EBITDA/t was at
US$351, up 12% QoQ and will expand further in 4Q due to higher steel prices.
Corus has a weak quarter; carbon credit sales provided some buffer
Corus’ steel sales at 3.5mt dipped 2% QoQ as demand stayed weak. 3Q EBITDA
at US$88mn was down 55% QoQ while EBITDA/t came in at just US$25. ~60% of
3Q EBITDA came from sale of carbon credits and excluding this, Corus results are
even worse. Management said that Corus is getting carbon credits as its plants
are running at 75-80% utilization. In 2Q, carbon credit sales accounted for ~50%
of EBITDA and management expects ₤30-35m of sales per quarter going forward
as well. We will seek more clarity on this from management. The South East Asian
units were weak as well and reported an EBITDA loss of US$3mn in 3Q.
Two strong quarters ahead for Tata Steel
We expect Tata Steel to report strong margin expansion over the next two
quarters as steel prices have risen across regions ahead of cost push. Indian
prices are already up by Rs4,000/t+ in 4QFY11. North Europe HRC prices in
4QFY11 are 12% above average 3Q levels. Corus will see the full benefit of this
with a lag in 1QFY12. However, we expect steel prices to decline by mid-CY11
once raw material prices recede and buyers enter destocking phase.
Orissa project finally taking off; maintain BUY
Tata Steel has finally started work at its much-delayed Greenfield steel project in
Orissa, which is a positive. The company also indicated that it might enter
definitive agreements with New Millennium Corporation to develop the Labmag
and Kemag iron ore deposits, which have combined reserves of 5.6bn tons of iron
ore. This will be a long term positive but would increase capex and debt levels
near-term. We are also a bit concerned on the 10% QoQ rise in consol net debt to
US$11.8bn in 3Q, though much of this is due to higher working capital at Corus.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Steel--3Q: Strong India; Weak Corus
Tata Steel’s 3Q consol recurring net profit at Rs10.2 bn was up 43% YoY and
in-line with estimates. Tata Steel India surprised positively with ASPs rising
6% QoQ and driving a 7% EBITDA beat. Corus’ results were expectedly weak
with EBITDA (60% of which was carbon credit sales) dropping 55% QoQ.
Tata Steel will see margins expand in both India and Corus over the next two
quarters as steel prices have risen across regions ahead of the cost push. Post
3Q results, we see some upside to our India profit forecasts. Maintain BUY.
Strong India results led by robust ASPs
3Q standalone net profit at Rs15bn was up 23% YoY and 7% above estimates.
While volumes dropped 1% QoQ, ASPs were up a strong 6% QoQ despite weak
domestic prices due to a better product-mix. Steel business EBITDA/t was at
US$351, up 12% QoQ and will expand further in 4Q due to higher steel prices.
Corus has a weak quarter; carbon credit sales provided some buffer
Corus’ steel sales at 3.5mt dipped 2% QoQ as demand stayed weak. 3Q EBITDA
at US$88mn was down 55% QoQ while EBITDA/t came in at just US$25. ~60% of
3Q EBITDA came from sale of carbon credits and excluding this, Corus results are
even worse. Management said that Corus is getting carbon credits as its plants
are running at 75-80% utilization. In 2Q, carbon credit sales accounted for ~50%
of EBITDA and management expects ₤30-35m of sales per quarter going forward
as well. We will seek more clarity on this from management. The South East Asian
units were weak as well and reported an EBITDA loss of US$3mn in 3Q.
We expect Tata Steel to report strong margin expansion over the next two
quarters as steel prices have risen across regions ahead of cost push. Indian
prices are already up by Rs4,000/t+ in 4QFY11. North Europe HRC prices in
4QFY11 are 12% above average 3Q levels. Corus will see the full benefit of this
with a lag in 1QFY12. However, we expect steel prices to decline by mid-CY11
once raw material prices recede and buyers enter destocking phase.
Orissa project finally taking off; maintain BUY
Tata Steel has finally started work at its much-delayed Greenfield steel project in
Orissa, which is a positive. The company also indicated that it might enter
definitive agreements with New Millennium Corporation to develop the Labmag
and Kemag iron ore deposits, which have combined reserves of 5.6bn tons of iron
ore. This will be a long term positive but would increase capex and debt levels
near-term. We are also a bit concerned on the 10% QoQ rise in consol net debt to
US$11.8bn in 3Q, though much of this is due to higher working capital at Corus.
No comments:
Post a Comment