tata steel ltd - q1fy12 result update

8/4/2019 TATA Steel Ltd - Q1FY12 Result Update

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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: [email protected]

NG TERM INVESTMENT CALL

BUY22 August 2011

Company Report | Q1FY12 Result Update

Results Highlights

TATA Steel Ltd (TATA) reported its first quarter consolidated results for

FY12 and has registered a net sales growth of 21.6% YoY to INR 328,399

mn which was ~9% above our estimates. Consolidated sales volume at 6.1

mn tonnes in Q1FY12 were 3.1% higher than the deliveries of 5.9 mn

tonnes recorded in Q1 FY11.

The jump in the top line was due to the higher sales volume at the Indian

operation (1.59 mn tonne, 14% YoY growth) along with improved average

realisation compared to the spot market. Revenue in Q1FY12 at INR 78,600

mn was 20% higher on YoY.The average realisation for the quarter has

improved by 5.6% YoY. EBITDA at the Indian operation has increased by

6.7% on YoY with an EBITDA/ ton of USD 440. There is an one off gain of

INR 5,110 mn from the stake sales in TATA Refractories Ltd, at its Indian

operation.

European operation with a turnover of INR 205,350 mn was 20.5% higher

on YoY, on the back of higher realisation. The increase in the average

realisation (23% on YoY) was partly off set by the lower volume. European

operation at 3.5 mt has declined by 2.2% on YoY. High raw material cost

has resulted in EBITDA decline of 10% on YoY at INR 12,220 mn with an

EBITDA/ton of USD 78. However the company has registered a one off

gain of INR 6,850 mn on the arbitration settlement of the TCP.

Companys South East Asian operation almost remained flat during the

quarter under review. Sales volume at NatSteel Holding is at 0.46 mn

tonnes remained flat compared to deliveries in Q1 FY11. While Turnover

in Q1 FY12 at INR 22,150 mn was up 27.1% YoY. EBITDA during the

quarter has declined by 66% to INR 320 mn due to higher electricity cost

and decline in the scrap/rebar price spread. However TATA Steel Thailand

has posted sales volume growth of 7.6% on YoY while the turnover at INR

11,160 mn was up 28.0% on YoY. EBITDA in Q1FY12 at INR 570 mn was

almost flat compared to INR 560 mn in Q1FY11.

Consolidated net profit during the quarter has shown a growth of 192% on

YoY to INR 53,466 mn. The robust jump in the PAT was all due to the extra

ordinary income during the quarter. This includes stake sales in the TATA

Refractories (INR 5,760), stake sales in Riversdale Mining (INR 49,420mn)and arbitration settlement at TCP (INR 5,980 mn).

Industry Steel

CMP (INR) 459Target (INR) 690

Upside / Downside (%) 50

52 week High/Low (INR) 714/459

Market Cap (INR Mn) 440,471

3M Avg. Daily Volumes 4049,070

EV/EBITDA(FY13e) 4.8

Shareholding Pattern (%)

Stock Performance

450

500

550

600

650

700

750

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

TATA Steel Nifty

Performance (%)1 Month 3 Months 1 Year

TATA -20.2 -18.4 -12.1

NIFTY -13.0 -10.7 -12.5* Source: Bloomberg, Unicon Research (INR Mn)

Particulars Actual Estimates

Total Income 330,002 301,450

EBIDTA 44,229 46,785

Reported PAT *53,466 17,350*Include One Off Gain


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Out Look & Valuation

TATA Steel is continuously focusing on restructuring its business model

with divesting its under performing assets. This would generate smooth

cash flow for the the existing expansion plan and upcoming opportunity.

FY12 capex is expected to be USD 1.8 bn in Indian operations and another

USD 0.6 bn in European operation.

The management has given a guidance for 9-9.2 mn tonne of steel for FY13.Companys brown field expansion at Jamshedpur is likely to be

commissioned by March 2012 and expected to be commercialised by the

Q2FY13. In addition to this the Mozambique coal project is expected to start

by end of FY12 and expect 0.7 mt despatch in FY13, and gradually would

rise to 1.5 mt. New Millennium iron ore is expected to be operational during

2014 with production over 1 mt in the first year.

The company is passing through a phase of consolidation. There are

uncertainty regarding the revival of the global economy but the companyexpects to perform well on the back of stable demand from the domestic

market.

At CMP the stock is available at EV/EBITDA of 4.8x its FY13e and PE

multiple of 6x of its FY13e earnings. Considering the expansion plan and the

demand scenario, we believe that the company has potential for improved

performance. We recommend BUY on the stock and maintain our price

target of INR 690.


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Financials (INR in mn)

DESCRIPTION Q1FY12 Q1FY11 Y0Y Q4FY11 QoQ

Net Sales 328,399 270,101 21.6% 334,427 -1.8%

Other operating income 1,603 1,836 -12.7% 3,800 -57.8%

Total Operating Income 330,002 271,937 21.4% 338,227 -2.4%

Total Expenditure 285,773 227,609 25.6% 293,566 -2.7%

EBITDA 44,229 44328 -0.2% 44,661 -1.0%

EBITDA (%) 13% 16% -290bps 13% 20bps

Depreciation 11,508 10,439 10.2% 11,664 -1.3%

EBIT 32,721 33,888 -3.4% 32,997 -0.8%Other Income 38,823 593 6445.7% 2,116 1734.9%

Interest 7,377 5,976 23.4% 7,655 -3.6%

Exceptional Items 0 -599 -100.0% 22,794 -100.0%

PBT 64,167 27,907 129.9% 50,252 27.7%

Tax 11,230 10,005 12.2% 8,764 28.1%

Profit After Tax 52,937 17,902 195.7% 41,487 27.6%

Minority Interest 248 -65 -482.3% 185 34.2%

Shares of Associates 281 416 -32.5% 84 235.0%

Consolidated Net Profit 53,466 18,253 192.9% 41,756 28.0%

Net Profit (%) 14.5% 6.7% 780bps 12.3% 223bps

EPS 52 20 164.8% 44 19.0%

Source: Company, Unicon Research, *Consolidated Financial


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Unicon Investment Ranking MethodologyRating Buy Accumulate Hold Reduce Sell

Return Range >= 20% 10% to 20% -10% to 10% -10% to -20%

tata steel ltd - q1fy12 result update

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