Tata Steel rallies 7% as Q4 profit beats estimates

Tata Steel reported consolidated net profit at Rs 2,295 crore in March quarter on account of better-than-expected profitability at the European operations.

Shares of Tata Steel rallied 7 per cent to Rs 544 in intra-day trade on Friday on the BSE after the company reported a better-than-expected consolidated net profit of Rs 2,295 crore in the March quarter (Q4FY19). Profits inched up on account of profitability at the European operations that exceeded expectations. Analysts,on an average, had expected net profit of Rs 2,167 crore for the quarter.

The company’s consolidated revenue grew 26 per cent at Rs 42,424 crore against Rs 33,705 crore in the corresponding quarter of previous fiscal. Consolidated Ebitda (earnings before interest, tax, depreciation and amortization) was also up 17 per cent year-on-year (YoY) at Rs 7,814 crore.

“Sequential improvement in profitability was primarily on account of better than expected profitability at the European operations aided by one-off revenues from land/emission sales and lower maintenance costs with blast furnace 5 at Port Talbot resuming operations,” analysts at Antique Stock Broking said in a result update and maintained ‘buy’ rating on the stock with 12 month target price of Rs 576 per share.

“Tata Steel is targeting a further deleveraging of $ 1 billion (approx. Rs 7,000 crore) at a gross debt level by end of FY20. Domestic steel demand is expected to maintain a steady growth rate post the conclusion of the general elections and gradually improving liquidity conditions. International prices have rebounded from lower levels and would be supported by firm input costs,” the brokerage firm said.

Analysts at JP Morgan were positive on Tata Steel given the strong rally in steel prices and the company’s raw material security.

"Exposure in the value-added business positions the company well for the steel cycle upturn in India. With iron ore prices surging, steel prices should follow suit and Tata Steel is well placed to benefit from the same," they said.

At 10:58 am, Tata Steel was up 6 per cent at Rs 542 on BSE, as compared to 0.20 per cent rise in the S&P BSE Sensex. The trading volumes on the counter jumped nearly 3-fold with a combined 22 million shares changing hands on the BSE and NSE so far.