Tata Steel Ltd. share price target

15 August 2020 Tata Steels (TATA) 1QFY21 consolidated EBITDA at INR5b (-91% YoY) was the weakest in the past 10 years. The COVID-19 crisis led to a sharp decline in both volumes and margins across all entities. Margin outlook in Indian operations, however, is much better with prices bouncing back to near pre-COVID levels. Europe, though, should remain a drag with EBITDA losses expected to continue in the near term. We have raised FY21/FY22E EBITDA estimates by 16%/7% to factor in the improved outlook in Indian operations. However, leverage remains unfavorable at 6.8x FY21 EBITDA. reported EBITDA plunged 89% QoQ (-91% YoY) to INR5.1b (v/s est. INR10.3b) in 1QFY21, led by significantly lower profitability in Tata Steels India operations and losses in Europe. Adjusted EBITDA (eliminating impact of forex movement on investments) was also weak at INR10.4b (-81% YoY).

Tata Steel is a leader in the global steel industry with operations spanning over 26 countries with key operations in India, Netherlands and United Kingdom. Tata steel primarily caters to customers in automotive,...

Domestic operation in FY20 comprises 64% of total sales volume In India, Tata Steel has operations in Jamshedpur (10 MT), Kalinganagar (3 MT), Tata Steel BSL (5.6 MT) and Tata Long products (1 MT), aggregating to 19.6 MT. Indian operations' key assets viz. Jamshedpur, Kalinganagar, Angul have globally cost competitive position, aiding overall EBITDA margins. In FY20, the higher margin domestic operations accounted for ~64% of overall sales volumes. In FY20, Tata Steel's consolidated sales volume was 26.7 MT of which Indian operations contributed 16.97 MT (~57% in FY19)....

1 July 2020 Tata Steels (TATA) 4Q EBITDA rose 28% QoQ to INR46.5b and surprised positively led by improved performance in Europe and Bhushan. Near term earnings outlook is weak due to lower domestic demand necessitating higher exports which adversely impacts EBITDA. Moreover, leverage remains discomforting at 8x of FY21 EBITDA. Given the challenges in Europe, we cut our FY21/22 EBITDA estimates marginally rating on the stock. INR40.4b) in 4QFY20 due to improved profitability in Tata Steel BSL and Europe. Consolidated sales volumes stood at 6.5mt, down 11%/14% QoQ/YoY. Other income was substantially higher at INR13.2b (2.7x YoY, 14.x QoQ), due to one-off gains.

Tata Steel (TATA) reported Q4FY20 EBITDA above our/consensus estimates by 12%/8% at Rs46.5bn (up 48% QoQ/down 38% YoY), led by higher than expected earnings in TATA Steel Europe (TSE). While, Indian operations reported earnings in line with our expectation. Stock moved up ~20% over last couple of months in light of improvement in global prices (up 15% from bottom), low input prices and gradual recovery in domestic demand. However, we expect prices to weaken in H2CY20 due to ease in China's pent-up demand and sharp increase in Chinese steel...

Tata Steel Ltd. reported a wider-than-expected loss as prices of steel fell and the company accounted for impairment due to Covid-19. Consolidated net loss stood at Rs 1481.34 crore in the fourth quarter compared with a profit of Rs 2,382.55 crore in the same quarter a year ago. The steelmaker made a one-time provision of Rs 3,141 crore for the impairment of non-current assets that led to the higher loss. OPM of the company stood at 2.39% compared to 17.48% in Q4FY19. As a result operating...

Steel prices and adverse spreads play spoilsport Tata Steel is a leader in the global steel industry with operations spanning over 26 countries with key operations in India, Netherlands and United Kingdom. Tata steel primarily caters to customers in automotive,...

Domestic operations to account for ~71% of capacity by 2025 In India, Tata Steel has operations in Jamshedpur (10 MT), Kalinganagar (3 MT), Tata Steel BSL (5.6 MT) and Tata Long products (1 MT), aggregating to 19.6 MT. Indian operations' key assets viz. Jamshedpur, Kalinganagar, Angul have globally cost competitive position, aiding overall EBITDA margins. Going forward, Tata Steel is planning to increase India capacity to 30 MT by 2025 through organic & inorganic routes, thereby increasing share of higher margin domestic capacity to 71% by 2025, auguring well for company....

EBITDA loss of $54/t in the Europe business was significantly higher than our est. of $25/t, although the India EBITDA, adjusted for Rs4.7bn write-back in other expenses, was Rs9,632/t (yoy/qoq: -37%/ -14%), in line with our est. of Rs9,640/t. Net debt remained high at Rs1,046.3bn, down Rs23bn qoq. We note that the recognition of finance lease as per AS 116 has inflated debt by Rs38bn, while the acquisition debt of Usha Martin, Rs39bn, has just started yielding positive cash flow. Deleveraging balance sheet by $1bn in FY20 has been ruled out, although the FY21 target remains intact. Capex is likely to overshoot to Rs90bn vs. Q2 guidance of Rs83bn, largely on account of...

Tata Steel (TATA) reported disappointing set of Q3FY20 earnings with consolidated Adj. EBITDA below our/consensus estimates by 33%/22%. Except better volumes in domestic operations, company missed on rest of all fronts. Adjusted domestic EBITDA/t fell 18% QoQ to Rs9,640 (PLe:11,460) due to sharp fall in realisations. TSE posted EBITDA loss of Rs9.6bn (PLe:+Rs1.7bn) after a gap of 15 quarters. This came as a big disappointment...