Tata Steel shares in focus after Q4 results. Motilal Oswal says performance in-line, net debt reduction positive

Shares of Tata Steel are in focus on Wednesday morning after the Tata group firm reported 82 per cent plunge in net profit for the March quarter. Many brokerages had anticipated a 90-98 per cent drop in profit for the quarter. Motilal Oswal Securities said the performance was in-line at operating level; net debt reduction was a positive, the domestic brokerage said.

Tata Steel reported 82.5 per cent decline in bottom line at Rs 1,705 crore for the quarter against Rs 9,756 crore in the year-ago period. The company's revenue from operations fell 9 per cent to Rs 62,962 crore from Rs 69,324 crore in the year-ago quarter

Motilal Oswal said Tata Steel's consolidated sales volume at 7.78 million tonnes (MT) was above its estimates of 7.2 mt. The average selling price of Rs 80,927 per tonne (down 6 per cent YoY) was also largely in line with the brokerage estimate of Rs 79,993 per tonne.

Consolidated revenue stood at was 9 per cent higher than an estimate of Rs 57600 crore, the brokerage said citing higher volumes in India and Europe as the reason behind the beat.

Tata Steel, it said, reported a QoQ increase of Rs 2,453 per tonne in ASP that led to the improved performance," the brokerage said adding that profitability was hit by higher finance costs, taxes, and lower other income. Ebitda, Motilal Oswal said, was in line with its estimate of Rs 6,900 crore.

"The net debt/Ebitda stood at 2.07 times during the quarter. Capex during the quarter stood at Rs 4,400 crore and the 5 mt Kalinganagar plant and 0.75 mt EAF mill at Punjab are progressing well. The 6 mt pellet plant at Kalinganagar has already started production.  NINL is steadily ramping up its production and is currently operating at 1 mt run rate on an annualised basis (crude steel plus pig iron production)," the brokerage said while suggesting a 'neutral' rating on the stock

CLSA has a target of Rs 125 on the stock, Morgan Stanley sees the stock at Rs 110 while BofA Securities has a target of Rs 132 on the stock.

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