Tata Steel gains 6%, hits new high on strong March quarter results

Shares of Tata Steel rose 6 per cent and hit a new high of Rs 1,128.80 on the BSE in intra-day trade on Thursday after the company reported a higher-than-expected consolidated net profit, attributable to owners of the company, at Rs 6,644 crore in the March quarter (Q4) of FY21, against a net loss of Rs 1,481 crore in the corresponding period last year.

Revenue from operations jumped 39 per cent year-on-year (YoY) to Rs 49,977 crore on the back of higher steel prices and strong volumes, leading to strong operational gains.

The stock recovered 8 percent from an intraday low of Rs 1,044, touched in early morning deals on the BSE. In the past one month, Tata Steel has rallied 30 per cent, against 0.74 per cent decline in the S&P BSE Sensex.

Tata Steel’s consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) for Q4FY21 came in at Rs 14,184 crore (up 48 per cent QoQ, 196 per cent YoY). Tata Steel standalone operations reported EBITDA/tonne of Rs 27,775/tonne, while European operations reported EBITDA/tonne of US$66/tonne.

Tata Steel reported a steady operational performance in Q4FY21 wherein standalone operations EBITDA/tonne came in higher than our estimate. Key highlight for FY21 was the remarkable debt repayment drive carried out by the company wherein Tata Steel consolidated operations net debt fell around 28 per cent in FY21, ICICI Securities said in a note.

Overall in FY21, Tata Steel consolidated operations repaid debt to the tune of Rs 29,390 crore (net debt repayment of Rs 10,781 crore in Q4FY21). Hence, Tata Steel’s consolidated net debt declined from Rs 104,779 crore as on March 2020 to Rs 75,389 crore as on March 2021. Net debt to EBITDA improved to 2.44x and net debt to equity improved to 0.98x.

“With a strong steel price and Ebitda generation outlook, we believe FY22 deleveraging is likely to be higher than the company’s guidance (of over US$1bn). Tata has accelerated Capex allocation for a pellet plant and cold roll mill (CRM) at Kalinganagar, and has restarted work on 5 MTPA expansions. It also recommended a dividend of Rs 25/share. The outlook for steel prices, European profitability and timeline for Kalinganagar expansion will be key items from its earnings call,” analysts at CLSA said in the first take of Tata Steel result.