Tata Steel - March 2013 Results Preview - Motilal Oswal

- Tata Steel India (TSI): We expect net revenue to increase 11% YoY (up 12% QoQ) to INR105b due to higher sales volume. Steel volumes are expected to increase 22% YoY (up 14% QoQ) to 2.2mt. Realization is expected to decline 8% YoY (flat QoQ). We expect EBITDA to increase 16% QoQ to INR29.3b and EBITDA/ton to increase 2% QoQ to USD237/ton.

- TSE and others: We expect Tata Steel Europe (TSE) and other subsidiaries to report positive EBITDA due to QoQ increase in prices. Prices in most geographies, including Europe, were at 2-3 year low levels in 3QFY13, which improved in 4QFY13. Steel prices increased 6% QoQ in Europe in 4QFY13. We expect EBITDA/ton for TSE and subsidiaries to be USD7/ton in 4QFY13E. We also estimate steel shipments to remain flat YoY (up 13% QoQ) to 4.5m tons.

- Steel environment challenging, price outlook negative; Maintain Sell: We expect steel demand to remain challenging in most geographies. TSI margins are expected to remain suppressed due to lower steel prices and lower level of raw material integration in the expanded capacity. TSE's capex program, despite insufficient cash flows, will be an additional overhang on the stock. The stock trades at 10.9x FY15E EPS and an EV of 6.3x FY15E EBITDA. Maintain Sell.

Source : Equity Bulls

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