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D o m e s t i c m a r g i n s u n d e r p r e s s u r e …
Tata Steel’s Q2FY12 numbers were broadly below our expectations,
primarily on the back of the muted performance of domestic operations.
The EBITDA/tonne of domestic operations at ~US$364/tonne was notably
lower than our expectation of ~US$400/tonne. Tata Steel Europe (TSE)
reported an in line performance for Q2FY12 wherein the EBITDA/tonne
for TSE stood at ~$31.5/tonne, which was broadly in line with our
estimate of US$25/tonne. Primarily due to higher input costs, the
consolidated EBITDA margin declined 440 bps YoY and 510 bps QoQ to
8.4% (our estimate: 10.8%). Furthermore, there was significantly higher
tax outgo (86.7% in Q2FY12 as against 27.5% in Q2FY11) during the
quarter under review. As a result, the ensuing consolidated PAT during
the quarter under review stood sharply lower both QoQ and YoY at |
212.4 crore.
ƒ Operational performance
For the domestic operations, the company posted an underlying
EBITDA/tonne of ~ US$364/tonne as against our estimate of ~
US$400/tonne (Q1FY12 EBITDA/tonne for domestic operations was
~US$437/tonne). Higher raw material costs coupled with higher
royalty costs and forex loss of ~ | 150 crore led to EBITDA margin
of domestic operations sliding by ~580 bps QoQ to ~34%. Tata
Steel Europe (TSE) reported an in line performance for Q2FY12.
While the volume at 3.48 million tonnes (MT) was better than our
estimate, the EBITDA/tonne for TSE in Q2FY12 was at ~$30/tonne,
which was in line with our estimate of ~$25/tonne.
V a l u a t i o n
At the CMP of | 430, the stock is discounting its FY13E EPS by 6.2x and
EV/EBITDA by 5.0x. We have a cautious view on the company on account
of subdued demand growth seen domestically and increased global
macro headwinds. We have valued the Indian operations at 5.5x its FY13E
EV/EBITDA and European and Asian subsidiaries at 4x its FY13E
EV/EBITDA. We have arrived at a target price of | 447 and assigned a
HOLD rating to the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
D o m e s t i c m a r g i n s u n d e r p r e s s u r e …
Tata Steel’s Q2FY12 numbers were broadly below our expectations,
primarily on the back of the muted performance of domestic operations.
The EBITDA/tonne of domestic operations at ~US$364/tonne was notably
lower than our expectation of ~US$400/tonne. Tata Steel Europe (TSE)
reported an in line performance for Q2FY12 wherein the EBITDA/tonne
for TSE stood at ~$31.5/tonne, which was broadly in line with our
estimate of US$25/tonne. Primarily due to higher input costs, the
consolidated EBITDA margin declined 440 bps YoY and 510 bps QoQ to
8.4% (our estimate: 10.8%). Furthermore, there was significantly higher
tax outgo (86.7% in Q2FY12 as against 27.5% in Q2FY11) during the
quarter under review. As a result, the ensuing consolidated PAT during
the quarter under review stood sharply lower both QoQ and YoY at |
212.4 crore.
ƒ Operational performance
For the domestic operations, the company posted an underlying
EBITDA/tonne of ~ US$364/tonne as against our estimate of ~
US$400/tonne (Q1FY12 EBITDA/tonne for domestic operations was
~US$437/tonne). Higher raw material costs coupled with higher
royalty costs and forex loss of ~ | 150 crore led to EBITDA margin
of domestic operations sliding by ~580 bps QoQ to ~34%. Tata
Steel Europe (TSE) reported an in line performance for Q2FY12.
While the volume at 3.48 million tonnes (MT) was better than our
estimate, the EBITDA/tonne for TSE in Q2FY12 was at ~$30/tonne,
which was in line with our estimate of ~$25/tonne.
V a l u a t i o n
At the CMP of | 430, the stock is discounting its FY13E EPS by 6.2x and
EV/EBITDA by 5.0x. We have a cautious view on the company on account
of subdued demand growth seen domestically and increased global
macro headwinds. We have valued the Indian operations at 5.5x its FY13E
EV/EBITDA and European and Asian subsidiaries at 4x its FY13E
EV/EBITDA. We have arrived at a target price of | 447 and assigned a
HOLD rating to the stock.
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