Tata Steel - 1QFY2013 Result Update - Angel Broking

Higher input costs dent standalone results: Tata Steel's Indian operations posted a net sales growth of 13.3% yoy to Rs.8,908cr mainly due to higher realizations (+12.4% yoy to Rs.51,530/tonne). Volumes, however, were flat yoy at 1.6mn tonne. The EBITDA fell by 10.4% yoy to Rs.2,780cr and margin slipped 827bp due to higher input costs. The PAT fell by 20.6% yoy to Rs.1,357cr due to lower other income during 1QFY2013 compared to 1QFY2012.

Disappointing consolidated results: The company's consolidated net sales rose marginally by 2.5% yoy to Rs.33,821cr due to subdued performance from Tata Steel Europe (TSE) where the volumes declined by 9.6% yoy to 3.21mn tonne. The EBITDA/tonne for TSE operations fell drastically by 55.7% to $35 due to higher power and employee costs. Consequently, consolidated net profit declined 59.0% yoy to Rs.598cr.

Outlook and valuation: We continue to maintain our positive stance on Tata Steel owing to its buoyant business outlook, driven by a) higher sales volume in FY2014 on the back of 2.9mn tonne brownfield expansion project in Jamshedpur, b) raw-material projects at Mozambique and Canada and c) restructuring initiatives at TSE. We maintain our Buy rating on the stock with a revised SOTP target price of Rs.481.

Source : Equity Bulls

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