Tata Steel - 4QFY2015 Result Update - Angel Broking

Lower realisations and higher RM cost impact standalone earnings: For 4QFY2015, Tata Steel's standalone revenues declined by 13% yoy to Rs. 10,635cr (6% ahead of our estimate of Rs. 10,035cr). The blended realisation declined by 13% to Rs. 44,165/tonne, 6% higher than our estimate of Rs. 41,674. Raw material expenses remained high at 31% of revenues as against our expectation of 27%, impacted by consumption of imported iron ore, inventory write-down and provision for royalty. The EBITDA margin declined to ~16%, below our estimate of 23%.

Overseas operations remain under pressure: Tata Steel Europe (TSE)'s sales volumes declined 6.4% yoy to 3.8MT. The EBITDA/tonne increased by 37% yoy to $44, but came in lower than our estimate of $49. The South East Asia (SEA) operations continued to remain under pressure, with deliveries declining 29% yoy to 0.76MT. SEA posted an EBITDA loss of Rs. 232cr for 4QFY2015, as against an EBITDA of Rs. 80cr in 4QFY2014.

Outlook and valuation: We reduce our target price for Tata Steel to Rs. 380 (previous target Rs. 458) and downgrade tour recommendation to 'Accumulate' led by reduction in FY2016E and FY2017E earnings on account of higher royalty expenses and weakness in steel realizations.

Shares of TATA STEEL LTD. was last trading in BSE at Rs.341.55 as compared to the previous close of Rs. 342.9. The total number of shares traded during the day was 573843 in over 8651 trades.

The stock hit an intraday high of Rs. 347.75 and intraday low of 340.8. The net turnover during the day was Rs. 197292207.

Source : Equity Bulls

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