Tata Steel (TSL) – Leader in wait for its ace

Q3FY10 results review - ICICI Securities

TSL's Q3FY10 results exceeded estimates, with PAT rising 101% YoY & 32% QoQ to Rs11.9bn. Topline surged 10% QoQ, led by 12% topline growth in steel operations. Volumes grew ~10% QoQ and realisations ~2% QoQ. Sequential realisation growth of 2% was due to high-priced automotive contract settlement in Q3FY10, belying the industry trend of dipping prices. Raw material cost savings were partly dented by ~25% QoQ rise in employee costs on one-time provisioning of ~Rs950mn. Ferroalloys's performance was impressive, with EBIT margin rising ~800bps QoQ. TSL sold Tata Motors' DVR-A shares, resulting in higher other income of Rs2,636mn; PAT was partly muted by AS11 impact on buy-back of ~Rs1,850mn CARS. TSL prepaid Rs17bn debt in Q3FY10, leading to standalone net debt of Rs20bn. Maintain BUY. Our revised target price is Rs665.

Source : Equity Bulls

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