Tata Steel Q4 preview: Here's what to expect

Pan view of Tata Steel plant in Jamshedpur. Photo: IANS

Highlights

Shares of the company rose by 1% ahead of Q4FY17 result announcement

Tata Steel had reported profit for the first time in five quarters in Q3FY17

Experts estimates profit after tax (PAT) to be in range of Rs 12-16 billion in Q4FY17

Shares of Tata Steel inched up ahead of its financial result announcement. At 1231 hours the shares of the company were trading at Rs 459.75 per piece, up 0.88% or Rs 4 on BSE.

The company is set to announce its financial result on Tuesday for the quarter ended on March 31.

In the previous quarter, Tata Steel had reported a net profit of Rs 231.90 crore as against a net loss of Rs 274.72 crore in Q3FY16. The company had slipped into profit for the first time in five quarters.

Total income of Tata Steel increased from Rs 25865.2 crore in Q3FY16 to Rs 29521.6 crore in Q3FY17.

Consolidated EBITDA stood at Rs 3550 crore and the EBITDA margin improved by 120 basis points on sequential basis.

What experts outlook say?

The experts are predicting EBITDA to improve further in Q4FY17. According to Edelweiss Result Preview report, it expects better realisation in both India and Europe to
drive topline and profitability. While volume growth from Indian operations is expected at 17%YoY due to ramp up of Kalinganagar operations.

However, European operations are expected to deliver lower volumes on account of preference of the company for value added sales.

Having similar positive outlook for the company, Motilal Oswal in its research report said that company's profit after tax (PAT) is estimated to be around Rs 15.8 billion.

Giving outlook for India's operation, the report said that for India operations, Tata Steel's standalone EBITDA is estimated to increase 6% QoQ to Rs 35.7 billion on higher volumes. The increase in realization of approx. 7% QoQ would be largely offset by higher coking coal cost.

"The benefit of higher realization in the ferrochrome business would be offset by delayed impact of royalty. Volumes would increase 6% QoQ (17% YoY) to 3,177 kt on Kalinganagar ramp-up. Standalone EBITDA/t is estimated at Rs 11,239, broadly flat QoQ," the report said.

Moreover, sharing estimates for European operations, the report mentioned that EU steel margin is expected to expand from $38/t in Q3Y17 to $58/t on higher steel spreads. Q3 also had the impact of maintenance shutdown.

Volumes are estimated at 2.6mt. EBITDA is estimated at Rs 10.3 billion, up from Rs 6.1 billion in Q3FY17, the report added.

Further, Centrum Research said that they expect consolidated revenue of around Rs 298 billion, up 2.5% YoY. They estimate sales volumes of ~3.2 MT in India (up 17% YoY) and 2.5 MT in Europe.

"Blended realisations are expected to be higher by 4.4% QoQ in domestic operations led by the successive increase in prices during the last few months, and realisations in European operations are likely to be higher led by an uptick in global prices," it said.

The research agency expect European operations to show better profitability on sequential basis led by higher spreads and stable operations. Consolidated EBITDA at ~Rs 43.3 billion is expected to be higher by ~97% YoY and 22% QoQ. Consolidated adjusted PAT is expected at Rs 12 billion.

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