Tata Steel: Performance Highlights
Tata Steel: Performance Highlights
Tata Steel: Performance Highlights
(Rs cr) 1QFY11(S) 1QFY10(S) chg (%) 1QFY11(C) 1QFY10(C) chg(%) Investment Period 12 months
Net revenue 6,471 5,554 16.5 27,195 23,292 16.8
EBITDA 2,836 1,681 68.8 4,433 (30) - Stock Info
EBITDA Sector Steel
43.8 30.3 1,357bp 16.3 - -
margin(%) Market Cap (Rs cr) 46,734
Rep. PAT 1,579 790 100.0 1,825 (2,209) - Beta 1.7
Source: Company, Angel Research 52 Week High / Low 737/409
Avg. Daily Volume 2163450
For 1QFY2011, Tata Steel reported consolidated net revenue of Rs27,195cr and
Face Value (Rs) 10
net profit of Rs1,825cr. Going forward, we expect Tata Steel Europe (TSE) to
BSE Sensex 18,167
report weaker performance on a sequential basis in 2QFY2011 due to lower
product prices, higher raw-material cost and lower volumes. On the other hand, Nifty 5,452
the company’s Indian operations are expected to remain strong because of higher Reuters Code TISC.BO
integration levels. We maintain our Buy rating on the stock. Bloomberg Code TATA@IN
The ferro chrome segment was slightly affected by lower volumes in the low
value-added segment (Dolomite). However, average ferro realisation stood at
US $1,437/tonne as compared to US $847/tonne in 1QFY2010 and
US $1,152/tonne in 4QFY2010. The company reported EBITDA of
US $44mn in 1QFY2011 as against US $4mn in 1QFY2010.
Production at TSE was also affected by the shutdown of blast furnace and fire
incident at Ijmuiden.
The 3mn tonne expansion in India is on track and expected to come on stream
by October–December 2011.
Net debt at the end of 1QFY2011 stood at US $9.2bn. During the quarter, the
company raised US $230mn through preferential allotment of shares and
warrants.
Result highlights
Standalone performance affected by lower volumes
Tata Steel’s standalone 1QFY2011 net revenue grew by 16.5% yoy to Rs6,471cr
but was down 13.3% qoq. During the quarter, production was lower on a
sequential basis due to maintenance shutdown and power failure at Jamshedpur
plant. Sales volumes were flat on a yearly basis, declining 17.7% qoq to 1.4mn
tonnes. Average realisation increased by 16.8% yoy and 8.3% qoq to
Rs42,871/tonne. EBITDA margin expanded by 1,357bp to 43.8% on account of
cost-reduction initiatives and higher realisations. Consequently, EBITDA grew by
68.8% yoy to Rs2,836cr. During the quarter, while interest expense declined by
4.2% yoy to Rs328cr, other income increased by 19.3% yoy to Rs129cr. As a result,
net profit came in at Rs1,579cr, registering growth 100% yoy.
Investment rationale
Brownfield expansion on track
Tata Steel’s 3mn tonne brownfield expansion plan is on track and is expected to be
commissioned by October–December 2011. We believe the company’s profitability
would be further supported by higher volumes from FY2013E.
Tata Steel is in the process of developing a coking coal mine in Mozambique and
an iron ore mine in Canada to increase the integration levels of TSE. The projects
are expected to be commissioned by 1QFY2012E. The total spending remaining
for the Mozambique project is US $100mn–150mn, while the Canadian project
will involve a capex of CAD350mn. We expect the company’s backward
integration projects in Mozambique and Canada to translate into significant
earnings improvement for TSE.
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Key ratios
Y/E March FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E
Valuation ratio (x)
P/E (on FDEPS) 7.1 3.2 8.9 - 7.2 6.5
P/CEPS 6.0 2.4 4.8 18.8 4.2 3.9
P/BV 2.1 1.2 1.6 1.7 1.4 1.2
Dividend yield (%) 3.7 3.5 1.6 - 1.9 2.2
EV/Sales 2.5 0.7 0.7 0.9 0.8 0.4
EV/EBITDA 6.3 5.2 5.4 12.0 5.9 5.2
EV/Total assets 1.1 1.0 1.1 1.1 1.0 0.9
Per share data (Rs)
EPS (Basic) 73.8 176.8 66.1 (24.9) 73.1 80.7
EPS (fully diluted) 73.8 162.6 59.0 (25.0) 73.1 80.7
Cash EPS 88.1 217.1 109.8 28.0 124.4 134.7
DPS 19.3 18.4 8.3 - 10.3 11.3
Book value 255.4 450.0 330.2 314.9 376.5 444.4
DuPont analysis
EBIT margin 35.1 10.1 9.4 3.5 9.9 10.3
Tax retention ratio (%) 67.4 75.3 71.9 - 73.0 70.0
Asset turnover (x) 2.1 6.1 2.4 1.2 1.4 1.5
RoIC (Post-tax) 49.8 46.1 16.1 - 10.1 10.6
Cost of debt (post tax) 1.4 9.7 4.6 - 4.9 4.8
Leverage (x) 1.0 1.4 1.9 1.8 1.4 1.1
Operating RoE 96.3 98.6 38.4 - 17.4 17.0
Returns (%)
RoCE (Pre-tax) 22.6 21.0 15.4 5.2 13.2 14.1
Angel RoIC (pre-tax) 88.2 30.1 33.9 20.5 32.6 34.2
RoE 33.9 50.6 16.0 - 21.2 19.7
Turnover ratios (x)
Asset turnover (gross
1.0 2.3 1.5 1.0 1.1 1.1
block)
Inventory (days) 132 73 60 60 55 65
Receivables (days) 35 51 32 35 35 40
Payables (days) 37 27 26 25 25 25
WC cycle (days) 8 34 52 53 38 41
Solvency ratios (x)
Net debt to equity 1.0 1.4 1.9 1.8 1.4 1.1
Net debt to EBITDA 2.0 2.8 3.0 6.2 3.0 2.5
Interest coverage 35.4 3.2 4.2 1.2 3.5 4.0
Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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