4QFY13 results better than expected
Tata Steel (TATA) posted better than expected performance for 4QFY13.
Consolidated EBITDA grew 37% QoQ to INR43.7b (v/s our estimate of INR31b)
due to stronger performance across the group and divestment/closure of
some loss-making assets in Asia/Australia.
Adjusted consolidated PAT was INR8.8b (v/s our estimate of INR401m loss).
Reported consolidated loss after tax (after minority interest and associates)
was INR65.3b, which included INR74b of extraordinary loss (INR83.6b loss on
account of non-cash impairment of goodwill + INR9.43b gain on account of
sale of stake in Titan).
Tata Steel India's (TSI) EBITDA grew 31% QoQ to INR33b (v/s our estimate of
INR29.3b) due to lower fuel cost and swing in other expenditure. The
significant reduction in other expenditure may not be sustainable.
Tata Steel Europe's (TSE) EBITDA expanded to USD33/ton (v/s our estimate of
USD7/ton), driven by sharper fall in raw material cost as compared to the fall
in realization and reduction in other expenditure. GBP69m benefit was on
account of unidentified factors.
However, outlook remains subdued; maintain Sell
Though operating costs have declined during the quarter and further
improvements can be expected in Europe due to full benefit of relighting of
furnace at Port Talbot, weakening international steel prices (down by USD100/
ton in last four months) and poor demand will keep margins under pressure.
Some of the savings in other operating expenditure seen in 4Q may not sustain.
TATA continues to invest in greenfield projects in India. The Odisha project is
likely to be completed by November 2014. Of the INR250b phase-1 capex,
INR83b has already been spent. Capex in India during FY14 is expected to be
INR80b. Total group capex is expected to be high at USD2.2b. As a result,
consolidated debt is unlikely to come down.
We expected TSI's EBITDA to shrink to USD208/ton in FY15 due to lower steel
prices and poor demand. Stock is trading at an EV of 6.2x FY15E EBITDA. Sell.
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Tata Steel (TATA) posted better than expected performance for 4QFY13.
Consolidated EBITDA grew 37% QoQ to INR43.7b (v/s our estimate of INR31b)
due to stronger performance across the group and divestment/closure of
some loss-making assets in Asia/Australia.
Adjusted consolidated PAT was INR8.8b (v/s our estimate of INR401m loss).
Reported consolidated loss after tax (after minority interest and associates)
was INR65.3b, which included INR74b of extraordinary loss (INR83.6b loss on
account of non-cash impairment of goodwill + INR9.43b gain on account of
sale of stake in Titan).
Tata Steel India's (TSI) EBITDA grew 31% QoQ to INR33b (v/s our estimate of
INR29.3b) due to lower fuel cost and swing in other expenditure. The
significant reduction in other expenditure may not be sustainable.
Tata Steel Europe's (TSE) EBITDA expanded to USD33/ton (v/s our estimate of
USD7/ton), driven by sharper fall in raw material cost as compared to the fall
in realization and reduction in other expenditure. GBP69m benefit was on
account of unidentified factors.
However, outlook remains subdued; maintain Sell
Though operating costs have declined during the quarter and further
improvements can be expected in Europe due to full benefit of relighting of
furnace at Port Talbot, weakening international steel prices (down by USD100/
ton in last four months) and poor demand will keep margins under pressure.
Some of the savings in other operating expenditure seen in 4Q may not sustain.
TATA continues to invest in greenfield projects in India. The Odisha project is
likely to be completed by November 2014. Of the INR250b phase-1 capex,
INR83b has already been spent. Capex in India during FY14 is expected to be
INR80b. Total group capex is expected to be high at USD2.2b. As a result,
consolidated debt is unlikely to come down.
We expected TSI's EBITDA to shrink to USD208/ton in FY15 due to lower steel
prices and poor demand. Stock is trading at an EV of 6.2x FY15E EBITDA. Sell.
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