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Tata Steel - Q4FY20 Result Update - ICICI Securities

Posted On: 2020-07-02 04:45:20

Tata Steel reported healthy operational numbers wherein EBITDA came in higher than our estimate while European operations surprised positively by reporting positive EBITDA/tonne. However bottomline was impacted by exceptional expenses that led to a net loss for the quarter. Standalone operations reported sales volume of ~3.0 million tonnes (MT), marginally lower than our estimate of 3.1 MT. European operations reported steel sales of 2.4 MT, higher than our estimate of 2.3 MT. Bhushan Steel reported sales volume of 0.98 MT (lower than our estimate of 1.25 MT). The consolidated topline came in at Rs. 33770.0 crore (down 20.4% YoY, 4.9% QoQ), largely in line with our estimate of Rs. 34622.3 crore. Consolidated EBITDA came in at Rs. 4646.9 crore (down 38.2% YoY, up 28.4% QoQ), higher than our estimate of Rs. 3500.8 crore. For the quarter, the company reported exceptional expense (net) to the tune of Rs. 3405.9 crore. Exceptional expense was primarily due to impairment at Tata Steel Europe, Tata Steel Mineral Canada, Tata Steel SEZ (cumulatively Rs. 3029 crore) and notional loss on fair valuation of preference shares held in TRF (Rs. 272 crore). Subsequently, on a consolidated basis, the company reported a net loss of Rs. 1236 crore.

Valuation & Outlook

In April 2020, Tata Steel's Indian operations operated at ~50% capacity utilisation. With the phased removal of lockdown restrictions in India, Tata Steel's upstream steelmaking operations have been ramped up and are currently operating at about 80% utilisation levels. Downstream units have reopened and are steadily ramping up. In Europe, Tata Steel Europe continues to operate at about 70% utilisation. After a muted Q1FY21 (on account of Covid-19 related concerns), the management expects to return to normal capacity utilisation levels by Q2FY21. We continue to value the company on an SOTP basis and arrive at a target price of Rs. 350. We maintain our HOLD rating on the stock.

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Shares of TATA STEEL LTD. was last trading in BSE at Rs.323.85 as compared to the previous close of Rs. 326.65. The total number of shares traded during the day was 566694 in over 6727 trades.

The stock hit an intraday high of Rs. 329 and intraday low of 320.5. The net turnover during the day was Rs. 183250895.

Source: Equity Bulls

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