Dear All,
Forwarding you the Result Update on Tata Steel for 4QFY2011 with a Buy recommendation and a Target Price of `799 (12 months).
Tata Steel reported robust profitability during 4QFY2011. Going forward, we expect Tata Steel’s India operations to benefit significantly on account of the firm steel prices; however, TSE would continue to suffer due to higher raw-material prices and subdued demand in Europe. Nevertheless, we continue to maintain our positive stance on Tata Steel owing to its buoyant business outlook mainly driven by higher sales volume in FY2013. We maintain Buy on the stock.
Standalone EBITDA/tonne lower due to one-time cost: Despite steel prices being substantially higher qoq, average steel realisations grew by only 12.8% yoy and 8.2% qoq to `44,667/tonne on account of lag effect of annual, semi-annual and quarterly contracts; realisation for 1QFY2012 is expected to be higher qoq. Sales volume for the quarter was flat yoy and increased by 4.3% qoq to 1.71mn tonnes. Thus, standalone net revenue grew by 13.6% yoy and 12.8% qoq to `8,341cr. During the quarter, there was a one-time cost of `130cr included in staff cost due to wage provision. As a result, EBITDA/tonne came in lower at US$396/tonne (up from US$383 in 3QFY2011).
TSE’s EBITDA/tonne higher due to provisions write-back: In Europe, deliveries grew by 5.9% yoy and 19.0% qoq to 4.13mn tonnes and average realisation increased by 22.2% yoy and 3.1% qoq to US$1,192. EBITDA/tonne for Tata Steel Europe (TSE) came in substantially higher at US$85 as it included US$133mn write-back of provisions relating to Teesside plant and fire at Ijmuiden. Adjusting for the same, adjusted EBITDA/tonne stood at US$53.
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With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
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Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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