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UBS Investment Research
Tata Steel Ltd.
1QFY12 results ahead of estimates
„ Event: 1Q Beat due to higher EBITDA; PAT driven by one-off gains
Consolidated pre-ex PAT of Rs14.7bn (-12%QoQ, -21%YoY) was higher than
UBS-e of Rs11.2bn due to higher EBITDA (Rs42.6bn,+18% QoQ, +0%YoY) in
both India/Corus. Net Sales of Rs328.4bn was in line. Reported PAT of 53.5bn
included Rs39bn in one-off gains. Corus’ EBITDA/t at US$78/t was higher (UBSe, US$31/t) due to higher ASP of US$1,313/t (+10%QoQ) while EBITDA/t in
India at US$422/t was higher (UBS-e, US$387/t) due to lower raw material costs
„ Impact: 2QFY12E to be impacted by higher coking coal /lower steel prices
We believe though 1Q results were ahead of estimates, 2Q is likely to be subdued
due to full impact of higher coking coal/lower steel prices. Tata Steel today 1)
marginally increased capex guidance for FY12/13 from US$2bn each to US$2.2-
2.5bn each due to faster progress on Odisha project. 2) Commissioning of 2.9mt
expansion in Jamshedpur is delayed to 4QFY12 from 3QFY12. There is some
downside to our volume est of 7.2/9.5mt for FY12/13 (co. indicated 6.6/9.2mt). 3)
However, coking coal shipment from Mozambique is on track by FY12end
„ Action: Stock at attractive levels post correction due to Eurozone concerns
We believe earnings growth for Tata Steel will be supported by: 1) 43% capacity
expansion in highly profitable Indian operations by FY12end, 2) partial backward
integration in Corus by FY 13 (from 0% in coal /iron ore to 10%/18%)
„ Valuation: Maintain Buy and PT of Rs860
We continue to value Tata Steel on SOTP basis with Indian business at 7.4x,
Europe at 6x and others at 6.5x EV/EBITDA on normalized EBITDA (FY12-13E).
Q Tata Steel Ltd.
Established in 1907, Tata Steel, the Tata Group's flagship company, is the
world's sixth largest steel company with presence in 50 countries and crude steel
production capacity of 30mtpa, following the acquisition of Corus Group in
2007. It plans to increase production capacity in its Jamshedpur plant, one of the
world's most modern steel making and finishing facilities, from 6.8mtpa to
10mtpa by 2010. Tata Steel has captive iron ore and coal mines. It has plans for
greenfield expansion in Jharkhand, Orissa and Chhattisgarh.
Q Statement of Risk
Our earnings estimates and valuation are subject to fluctuations, based on global
and domestic steel prices and the prices of key raw materials such as coking coal
which are difficult to predict. Tata Steel’s backward integration for key raw
materials such as iron ore and downstream expansion into value added products
would only partly mitigate the impact of these variables.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Tata Steel Ltd.
1QFY12 results ahead of estimates
„ Event: 1Q Beat due to higher EBITDA; PAT driven by one-off gains
Consolidated pre-ex PAT of Rs14.7bn (-12%QoQ, -21%YoY) was higher than
UBS-e of Rs11.2bn due to higher EBITDA (Rs42.6bn,+18% QoQ, +0%YoY) in
both India/Corus. Net Sales of Rs328.4bn was in line. Reported PAT of 53.5bn
included Rs39bn in one-off gains. Corus’ EBITDA/t at US$78/t was higher (UBSe, US$31/t) due to higher ASP of US$1,313/t (+10%QoQ) while EBITDA/t in
India at US$422/t was higher (UBS-e, US$387/t) due to lower raw material costs
„ Impact: 2QFY12E to be impacted by higher coking coal /lower steel prices
We believe though 1Q results were ahead of estimates, 2Q is likely to be subdued
due to full impact of higher coking coal/lower steel prices. Tata Steel today 1)
marginally increased capex guidance for FY12/13 from US$2bn each to US$2.2-
2.5bn each due to faster progress on Odisha project. 2) Commissioning of 2.9mt
expansion in Jamshedpur is delayed to 4QFY12 from 3QFY12. There is some
downside to our volume est of 7.2/9.5mt for FY12/13 (co. indicated 6.6/9.2mt). 3)
However, coking coal shipment from Mozambique is on track by FY12end
„ Action: Stock at attractive levels post correction due to Eurozone concerns
We believe earnings growth for Tata Steel will be supported by: 1) 43% capacity
expansion in highly profitable Indian operations by FY12end, 2) partial backward
integration in Corus by FY 13 (from 0% in coal /iron ore to 10%/18%)
„ Valuation: Maintain Buy and PT of Rs860
We continue to value Tata Steel on SOTP basis with Indian business at 7.4x,
Europe at 6x and others at 6.5x EV/EBITDA on normalized EBITDA (FY12-13E).
Q Tata Steel Ltd.
Established in 1907, Tata Steel, the Tata Group's flagship company, is the
world's sixth largest steel company with presence in 50 countries and crude steel
production capacity of 30mtpa, following the acquisition of Corus Group in
2007. It plans to increase production capacity in its Jamshedpur plant, one of the
world's most modern steel making and finishing facilities, from 6.8mtpa to
10mtpa by 2010. Tata Steel has captive iron ore and coal mines. It has plans for
greenfield expansion in Jharkhand, Orissa and Chhattisgarh.
Q Statement of Risk
Our earnings estimates and valuation are subject to fluctuations, based on global
and domestic steel prices and the prices of key raw materials such as coking coal
which are difficult to predict. Tata Steel’s backward integration for key raw
materials such as iron ore and downstream expansion into value added products
would only partly mitigate the impact of these variables.
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