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EARNINGS REVIEW
Tata Steel (TISC.BO)
Buy Equity Research
Above expectations: strong operating results in India and Europe
What surprised us
Tata Steel reported 1QFY12 consolidated net income of Rs53.4 bn (+193% yoy,
+28% qoq) including one-off gains from sale of investments in Tata Refractories
and Riversdale Mining. Importantly, at the operating level consolidated EBITDA
came in at Rs44.2bn, which is 5% ahead of our estimates. Highlights: 1) Indian
operations continued to be strong with 1Q EBITDA at Rs36.5 bn, up 19% qoq led
by higher-than-expected realisations (up 2% qoq) due to enriched product mix.
EBITDA/ton was US$435 (GSe: US$400). 2) European operations reported
underlying EBITDA of US$273mn on the back of higher realizations (up 11%
qoq) and higher than expected shipments (3.5 mn tonnes). Underlying
EBITDA/ton ofUS$78 (GSe: US$60) was a positive surprise. Consolidated net
debt as of 1QFY12 stood at US$9.1 bn, vs. US$10.4bn in 4QFY11. The
Jamshedpur brownfield expansion is on track for commissioning by end FY12E.
Management expects (a) growth expectations in Europe to remain muted with
rising uncertainty in next few months which may lead to a slower summer
quarter in 2Q, and (b) underlying stable demand in India but pricing may show a
downward bias in the near term.
What to do with the stock
Tata Steel India continues to deliver strong operating performance, aided
by integrated steel operations and a robust downstream business. Recent
restructuring initiatives and strong liquidity should improve the
competitive positioning of this business long term. We fine-tune our
FY12/13/14 EPS estimates by -2%/-1.5%/0.6 following 1Q results. We retain
our Buy (on CL) rating and our P/B based 12-m TP of Rs774. Risks: weaker
demand and higher-than-expected costs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Tata Steel (TISC.BO)
Buy Equity Research
Above expectations: strong operating results in India and Europe
What surprised us
Tata Steel reported 1QFY12 consolidated net income of Rs53.4 bn (+193% yoy,
+28% qoq) including one-off gains from sale of investments in Tata Refractories
and Riversdale Mining. Importantly, at the operating level consolidated EBITDA
came in at Rs44.2bn, which is 5% ahead of our estimates. Highlights: 1) Indian
operations continued to be strong with 1Q EBITDA at Rs36.5 bn, up 19% qoq led
by higher-than-expected realisations (up 2% qoq) due to enriched product mix.
EBITDA/ton was US$435 (GSe: US$400). 2) European operations reported
underlying EBITDA of US$273mn on the back of higher realizations (up 11%
qoq) and higher than expected shipments (3.5 mn tonnes). Underlying
EBITDA/ton ofUS$78 (GSe: US$60) was a positive surprise. Consolidated net
debt as of 1QFY12 stood at US$9.1 bn, vs. US$10.4bn in 4QFY11. The
Jamshedpur brownfield expansion is on track for commissioning by end FY12E.
Management expects (a) growth expectations in Europe to remain muted with
rising uncertainty in next few months which may lead to a slower summer
quarter in 2Q, and (b) underlying stable demand in India but pricing may show a
downward bias in the near term.
What to do with the stock
Tata Steel India continues to deliver strong operating performance, aided
by integrated steel operations and a robust downstream business. Recent
restructuring initiatives and strong liquidity should improve the
competitive positioning of this business long term. We fine-tune our
FY12/13/14 EPS estimates by -2%/-1.5%/0.6 following 1Q results. We retain
our Buy (on CL) rating and our P/B based 12-m TP of Rs774. Risks: weaker
demand and higher-than-expected costs.
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