Tata Steel Q2 preview: Steel giant may post net loss of up to Rs 153 crore

Tata Steel Q2 Preview: Steel giant Tata Steel will announce its financial results for the second quarter of the fiscal year 2025 (Q2FY25) on Wednesday, November 06, 2024.

 

Domestic brokerages anticipate a challenging quarter for Tata Steel marked by lower steel realisations and regional pricing pressures. 

 

Analysts expect volume growth on both standalone and consolidated levels; however, falling realisations in India and Europe are projected to weigh on profitability. 

 

Additionally, last month, Tata Steel announced its Q2FY25 production and delivery volumes (provisional) figures. In Q2FY25, Tata Steel India crude steel production stood at 5.27 million tonnes and deliveries were 5.10 million tonnes. 

 

 

Meanwhile, domestic deliveries were around 4.9 million tonnes, up 5 per cent year-on-year broadly in line with the growth in production. On a half year basis, crude steel production jumped 5 per cent annually while deliveries increased 4 per cent Y-o-Y. 

 

On the bourses, Tata Steel shares have fallen about 13 per cent in the past six months, though they have gained around 4 per cent year-to-date (Y-T-D). In the past month, the stock has dropped about 12 per cent. 

 

At 11:30 AM, Tata Steel shares were trading 2.67 per cent lower at Rs 145.70 per share, In comparison, BSE Sensex bled, down 1.65 per cent at 78,408.43 levels.

 

Given this, here’s what brokerages expect from Tata Steel Q2FY25 Results:

 

Phillip Capital  

Analysts at Phillip Capital expect consolidated volumes to improve 3 per cent quarter-on-quarter (Q-o-Q). However, operating performance in both India and Europe is expected to be impacted due to lower realisations.

 

On a standalone basis, volumes are projected to increase 3 per cent sequentially, with domestic realisations expected to decline 4 per cent Q-o-Q. Standalone Ebitda is forecasted to drop by 13 per cent Q-o-Q, primarily due to lower realisations, according to Phillip Capital.

 

Consequently, analysts at Phillip Capital project a consolidated adjusted net loss of Rs 133.6 crore year-on-year (Y-o-Y), with revenue estimated at Rs 55,863.6 crore, marking a modest 0.3 per cent Y-o-Y increase. Ebitda is seen at Rs 4,544.6 crore, up 6.5 per cent Y-o-Y. The anticipated volume stands at 7.6 million tonnes, up 7.4 per cent Y-o-Y.

 

Kotak Institutional Equities 

 

Those at Kotak Institutional Equities project standalone steel realisations to decline 3.1 per cent quarter-on-quarter (Q-o-Q) and 8.8 per cent year-on-year (Y-o-Y) due to regional pricing pressures.

 

Standalone volumes are expected to rise 4 per cent Y-o-Y and 1.5 per cent Q-o-Q to 5 million tonnes. India Ebitda per tonne is anticipated to decrease 12 per cent Q-o-Q (9.3 per cent Y-o-Y) to Rs 12,047 per tonne, primarily driven by lower realisations.

 

In Europe, analysts forecast an Ebitda loss of $74 per tonne, worsening from a loss of $28 per tonne in Q1FY25, due to higher costs associated with UK end-of-life assets.

 

As a result, Kotak Institutional Equities predicted a net loss of Rs 112.9 crore, with total revenue expected at Rs 53,380.9 crore, down 4.1 per cent Y-o-Y. Ebitda is projected at Rs 4,938.4 crore, reflecting a 15.7 per cent Y-o-Y increase.

 

Elara Capital

 

Elara Capital analysts anticipate that weak steel prices will pose major challenges for steel companies. They project a quarter-on-quarter (Q-o-Q) decline in blended realisations of Rs 2,700-3,100 per tonne for firms in their coverage universe for Q2FY25E. 

 

Overall, Ebitda per tonne is expected to contract by Rs 1,000-5,200 year-on-year (Y-o-Y), with Tata Steel as the sole exception, likely showing an increase of around Rs 200 per tonne. Nonetheless, all companies are expected to report a Q-o-Q decline in Ebitda per tonne, estimated between Rs 1,000 and 2,800.

 

Consequently, Elara Capital analysts estimate a net loss of Rs 153.1 crore, revenue of Rs 53,319.4 crore (up 4.2 per cent Y-o-Y), and Ebitda of Rs 4,650.8 crore, marking a 9 per cent Y-o-Y increase.