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Tata Steel (TISC.BO; Rs577.05; 1M)
Takeaways from Mumbai — Tata Steel presented at the Citi India Investor
Conference in Mumbai. Below are the key takeaways.
Expansion plans and capex — The 3mtpa Jamshedpur brownfield project is on
track. Upon its completion, Tata Steel will have ~10mt of capacity there, against the
current 6.8mt. This will consist of 6.4mt of Flat Product capacity and 3.3mt of Long
Product capacity. Thus, domestic capacity will account for a larger share of total
capacity (32% vs. 25% now) by Dec 2011.
Orissa project update — Of the planned 6mt Orissa project ($8bn), 3mt is likely to
be up by FY15, with the rest likely to be completed within another 2 years. At the
group level, the planned capex is ~$2.2bn in FY12 (similar to last year).
Overcapacity fears in India — Management does not believe there will be
oversupply in the market with the significant capacities that are being added by
major steel players - they are of the view that this capacity will take time to stabilize,
that there will be some degree of import substitution and demand will increase at
the same time. Also, most of the capacity that is being added by Tata Steel will be
diverted towards value-added products (2mt of the incremental 3mt).
European update — In Europe, realizations are expected to be higher qoq in
1QFY12 but volumes are likely to be lower. The European operations have been
restructured in order to better mitigate the volatile steel environment. The debt
restructuring in Europe means that the major repayments are due in 2014-2015.
The long product market continues to be difficult and initiatives such as mothballing
capacity, improving raw material sourcing and modernization should help in the
company's quest to reach its target EBITDA/t of $100 over the medium term vs. $63
in FY11. The volume target for Europe in FY12 is 15.5mt vs. 14.8mt in FY11.
Riversdale coal asset — Tata Steel effectively holds around 50% of Riversdale
(27% of the parent and 35% of the project company). It has plans to develop the
asset in 3 phases, with 1.7-2mt of coking coal production in the first phase. Since
Tata Steel has a 40% offtake share in Riversdale's Mozambique coking coal project,
it will get ~ 800kt from the asset once the capacity is fully ramped up (expected by
end CY12).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Steel (TISC.BO; Rs577.05; 1M)
Takeaways from Mumbai — Tata Steel presented at the Citi India Investor
Conference in Mumbai. Below are the key takeaways.
Expansion plans and capex — The 3mtpa Jamshedpur brownfield project is on
track. Upon its completion, Tata Steel will have ~10mt of capacity there, against the
current 6.8mt. This will consist of 6.4mt of Flat Product capacity and 3.3mt of Long
Product capacity. Thus, domestic capacity will account for a larger share of total
capacity (32% vs. 25% now) by Dec 2011.
Orissa project update — Of the planned 6mt Orissa project ($8bn), 3mt is likely to
be up by FY15, with the rest likely to be completed within another 2 years. At the
group level, the planned capex is ~$2.2bn in FY12 (similar to last year).
Overcapacity fears in India — Management does not believe there will be
oversupply in the market with the significant capacities that are being added by
major steel players - they are of the view that this capacity will take time to stabilize,
that there will be some degree of import substitution and demand will increase at
the same time. Also, most of the capacity that is being added by Tata Steel will be
diverted towards value-added products (2mt of the incremental 3mt).
European update — In Europe, realizations are expected to be higher qoq in
1QFY12 but volumes are likely to be lower. The European operations have been
restructured in order to better mitigate the volatile steel environment. The debt
restructuring in Europe means that the major repayments are due in 2014-2015.
The long product market continues to be difficult and initiatives such as mothballing
capacity, improving raw material sourcing and modernization should help in the
company's quest to reach its target EBITDA/t of $100 over the medium term vs. $63
in FY11. The volume target for Europe in FY12 is 15.5mt vs. 14.8mt in FY11.
Riversdale coal asset — Tata Steel effectively holds around 50% of Riversdale
(27% of the parent and 35% of the project company). It has plans to develop the
asset in 3 phases, with 1.7-2mt of coking coal production in the first phase. Since
Tata Steel has a 40% offtake share in Riversdale's Mozambique coking coal project,
it will get ~ 800kt from the asset once the capacity is fully ramped up (expected by
end CY12).
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