Tata Steel's Q3FY21 operational performance was better than our estimates. Consolidated topline came in at Rs. 39594 crore (up 7% QoQ, 11% YoY), broadly in line with our estimate of Rs. 39091 crore. During the quarter, for Indian operations while sales momentum was strong, deliveries were down 8% QoQ, 4% YoY to 4.65 million tonnes (MT) primarily due to lower opening inventory post strong sales in Q2FY21. European operations reported sales volume of 2.11 MT (down 10% YoY, 7% QoQ). Consolidated EBITDA was at Rs. 9464 crore (up 55% QoQ, 161% YoY), higher than our estimate of Rs. 8825 crore. Consolidated EBITDA margin was at 23.9% (up 1370 bps YoY, 750 bps QoQ), higher than our estimate of 22.6%. Ensuing consolidated PAT was at Rs. 4011 crore, higher than our estimate of Rs. 3672 crore (net loss of Rs. 1229 crore in Q3FY20 and net profit of Rs. 1665 crore in Q2FY21).
Valuation & Outlook
On the back of an increase in realisations both QoQ as well as YoY, Tata Steel's Indian operations reported a healthy performance. For the quarter, the healthy performance of Indian operations aided the consolidated operations. Going forward, we model consolidated EBITDA margin of 16.7% for FY21E and 16.6% for FY22E, FY23E each (9MFY21 consolidated EBITDA margin was 15.9%). The debt repayment drive also augurs well. We introduce FY23E estimates and roll over our valuations to FY23E. We value the stock on an SoTP basis and arrive at a target price of Rs. 750 (earlier target price of Rs. 625). On the back of the recent run-up witnessed in the stock, we downgrade the stock from BUY to HOLD.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_TataSteel_Q3FY21.pdf
Shares of TATA STEEL LTD. was last trading in BSE at Rs.671.85 as compared to the previous close of Rs. 680.45. The total number of shares traded during the day was 422806 in over 6816 trades.
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