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http://www.icicidirect.com/mailimages/ICICIdirect_TataSteel_Q3FY12.pdf
I n v e n t o r y w r i t e - d o w n i m p a c t s p e r f o r m a n c e …
Tata Steel’s Q3FY12 numbers were broadly below our expectations,
primarily due to the inventory write-down. During the quarter under
review, the total operating income stood at | 33103.1 crore (our estimate:
| 28194.5 crore) higher by 13.8% YoY and 1.8% QoQ. The EBITDA
margin during the quarter under review stood at 5.2% (our estimate
7.5%), which was lower by 660 bps YoY and 330 bps QoQ. There was
inventory write-down to the tune of | 741.7 crore, which led to muted
margins during the quarter under review. Consequently, the Tata Steel
group registered a net loss of | 603 crore in Q3FY12 compared to a net
profit of | 1003 crore in Q3FY11 (our estimate: | 133 crore).
ƒ Operational performance
The results of domestic operations broadly came in line with our
expectation. For domestic operations, the company posted an
underlying EBITDA/tonne of | 16218/tonne against our estimate of
| 15592/tonne (Q2FY12 EBITDA/tonne for domestic operations was
| 16786/tonne). Tata Steel Europe reported an EBITDA loss of | 781
crore (US$147 million) in Q3FY12. The Q3FY12 loss was mainly due
to mark-to-market provisions on stock. The reported EBITDA/tonne
was US$ -43.9/tonne. However, adjusting for the inventory write
down, the adjusted EBITDA/tonne came in at US$ -1.2/tonne.
V a l u a t i o n
At the CMP of | 472, the stock is discounting its FY13E EPS by 9.3x and
EV/EBITDA by 5.8x. We have a cautious view on overseas operations on
account of global macro headwinds. However, on the back of the
improvement seen in the domestic demand scenario, we have valued the
Indian operations at 6.0x its FY13E EV/EBITDA (from 5.5x earlier) and
European and Asian subsidiaries at 4x its FY13E EV/EBITDA and arrived at
a target price of | 442 assigning a HOLD rating to the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.icicidirect.com/mailimages/ICICIdirect_TataSteel_Q3FY12.pdf
I n v e n t o r y w r i t e - d o w n i m p a c t s p e r f o r m a n c e …
Tata Steel’s Q3FY12 numbers were broadly below our expectations,
primarily due to the inventory write-down. During the quarter under
review, the total operating income stood at | 33103.1 crore (our estimate:
| 28194.5 crore) higher by 13.8% YoY and 1.8% QoQ. The EBITDA
margin during the quarter under review stood at 5.2% (our estimate
7.5%), which was lower by 660 bps YoY and 330 bps QoQ. There was
inventory write-down to the tune of | 741.7 crore, which led to muted
margins during the quarter under review. Consequently, the Tata Steel
group registered a net loss of | 603 crore in Q3FY12 compared to a net
profit of | 1003 crore in Q3FY11 (our estimate: | 133 crore).
ƒ Operational performance
The results of domestic operations broadly came in line with our
expectation. For domestic operations, the company posted an
underlying EBITDA/tonne of | 16218/tonne against our estimate of
| 15592/tonne (Q2FY12 EBITDA/tonne for domestic operations was
| 16786/tonne). Tata Steel Europe reported an EBITDA loss of | 781
crore (US$147 million) in Q3FY12. The Q3FY12 loss was mainly due
to mark-to-market provisions on stock. The reported EBITDA/tonne
was US$ -43.9/tonne. However, adjusting for the inventory write
down, the adjusted EBITDA/tonne came in at US$ -1.2/tonne.
V a l u a t i o n
At the CMP of | 472, the stock is discounting its FY13E EPS by 9.3x and
EV/EBITDA by 5.8x. We have a cautious view on overseas operations on
account of global macro headwinds. However, on the back of the
improvement seen in the domestic demand scenario, we have valued the
Indian operations at 6.0x its FY13E EV/EBITDA (from 5.5x earlier) and
European and Asian subsidiaries at 4x its FY13E EV/EBITDA and arrived at
a target price of | 442 assigning a HOLD rating to the stock.
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