Mumbai: India’s biggest steel maker, Tata Steel Ltd, was the worst performer on the nation’s main stock index after Morgan Stanley and Credit Suisse Group said third quarter profit at its Corus unit missed estimates.
The steel maker fell 6.4% in Mumbai, extending its 18% decline this year. The stock more than doubled in 2007.
Price factor: Tata Steel managing director B. Muthuraman. Tata Steel’s profit, including that of Corus, was Rs1,400 crore in the December quarter, slightly worse than what analysts had expected.
Profit growth at Corus, acquired by Tata Steel a year ago in its biggest acquisition, has slowed as the London-based steel maker reduced prices because of a build-up of stocks in Europe. Corus said on Wednesday it will pass on record coal and coke costs to customers to spur earnings growth this year.
“This is slightly worse than we expected, probably due to price cuts in the quarter being deeper than we thought,” Credit Suisse analysts Neelkanth Mishra and Anubhav Aggarwal said.
Profit before interest, tax, depreciation and amortization, or Ebitda, at Corus was Rs1,810 crore, 12% less than Morgan’s forecast, analysts Vipul Prasad and Ketaki Kulkarni said in a note on Wednesday. Ebitda margin narrowed from 11% in April-September to 7.5% in the three months ended 31 December, more than expected, Credit Suisse said.
Profit, including that of Corus, was Rs1,400 crore in the December quarter, Tata said on Tuesday after markets closed, without giving comparable earnings for the year-ago period. The company didn’t break out earnings for Corus.
Both brokerages retained their ‘overweight’ and ‘outperform’ recommendations because of buoyant steel prices.
Tata Steel declined Rs52.6 to Rs766.45 on the Bombay Stock Exchange.
Steel Authority of India Ltd, the nation’s second biggest producer, fell 6.5% to Rs218.2 on concern the unexpected slowdown in industrial output may weaken demand for metals including steel.
Tata Steel, which sells about a fifth of the combined 23 million tonnes output in India, is less vulnerable than its Indian rivals to a domestic slowdown, analysts said.
While Corus has increased prices by more than $140 (Rs5,670) a tonne, according to Credit Suisse, Tata on 5 March raised rates for a third month for Indian customers by as much as $74 a tonne.
“If the stock weakens on these results, it would provide a buying opportunity,” Credit Suisse said.
Tata Steel trades at 6.1 times the 2009 profit forecast by Morgan Stanley, a 39% discount to the corresponding mean figure for global steel producers tracked by the brokerage, the analysts said in Wednesday’s note.