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Tata Steel reports in line operational performance; consolidated net debt down QoQ

ICICI Securities 08 Feb 2022

What’s Buzzing:

Tata Steel reported a steady performance in Q3FY22 wherein consolidated topline, EBITDA and PAT came in line with our estimates. During Q3FY22, Tata Steel’s consolidated net debt also declined on a QoQ basis.

Context:

During Q3FY22, Tata Steel reported a consolidated topline of Rs 60783 crore (up 45% YoY, 1% QoQ), in line with our estimate of Rs 59280 crore. Consolidated EBITDA for Q3FY22 was at | 15894 crore (up 66% YoY but down 3% QoQ), in line with our estimate of Rs 15956 crore. Ensuing consolidated PAT for the quarter was at Rs 9598 crore (up 139% YoY but down 24% QoQ), in line with our estimate of Rs 9676 crore. Tata Steel’s consolidated net debt declined from Rs 68860 crore at the end of Q2FY22 to Rs 62869 crore at the end of Q3FY22.

Our Perspective:

For Q3FY22, Tata Steel’s standalone operations EBITDA/tonne was at Rs 28631/tonne. For Q4FY22E, on a sequential basis, steel realisation (blended) of standalone operations is expected to witness a declining trend QoQ, on the back of softening trend in flat product steel prices and also on account of sequentially lower export realisation. Furthermore, on a QoQ basis, for Q4FY22E, coking coal costs of standalone operations are expected to increase by ~US$40/tonne. Hence, on the back of higher coking coal costs and softening trend in blended realisation, we expect Q4FY22E standalone operations EBITDA/tonne to be lower than in Q3FY22. For Q3FY22, Tata Steel European operations reported an EBITDA/tonne of US$181/tonne. For Q4FY22E, Tata Steel European operations EBITDA/tonne is expected to inch upwards sequentially, aided by lower iron ore costs on a QoQ basis. During Q4FY22E, Tata Steel European operations would also benefit from upward revision of auto and packaging contracts.

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