Tata Steel Q3 preview: PAT likely to post double-digit drop YoY, European operations may see EBITDA loss
- Overall, Tata Steel may record a decline across parameters such as revenue, EBITDA, and profit after tax (PAT) during Q3. Steel sales volumes may perform on a mixed note.
One of the leading steel manufacturing companies of India, Tata Steel is likely to witness yet another weak quarter for the period ending December 31, 2022 (Q3FY23). The Tata Group-backed steelmaker's net profit may decline more than half on a quarter-on-quarter basis. The year-on-year drop is likely to be massive. Its European operations are also seen to post EBITDA loss.
Overall, Tata Steel may record a decline across parameters such as revenue, EBITDA, and profit after tax (PAT) during Q3. Steel sales volumes may perform on a mixed note.
Tata Steel will present its December 2022 quarter earnings on February 6th.
Ahead of its earnings, Tata Steel shares closed at ₹120.10 apiece broadly flat compared to the previous closing on BSE. Its market cap is nearly ₹1.47 lakh crore.
In the second quarter of FY23, Tata Steel reported a PAT of ₹1,514 crore down by 87% from ₹11,918 crore in Q2FY22, owing to higher costs and weak operational performance amid a global economic slowdown. Revenue from operations however dipped at a much slower pace by 0.8% to ₹59,877.52 crore in Q2FY23 versus ₹60,387.13 crore in Q2 of the previous fiscal. EBITDA stood at ₹6,060.4 crore lower by 62%.
What to expect in Q3?
In its Q3 preview report for the metal sector, ICICI Direct said, "we expect Tata Steel's standalone operations to report an EBITDA/tonne of ₹12,500/tonne compared to ₹10,177/tonne in Q2FY23 and ₹28,631/tonne in Q3FY22."
For Q3, the brokerage expects Tata Steel's standalone operations to report steel sales volume of ~4.5 million tonnes (MT), up 5% YoY but down 6% QoQ while European operation steel sales volume is likely to come in at ~1.96 MT, down 9% YoY but up 5% QoQ.
Further, the brokerage believes the company's European operations to report a loss at the EBITDA level. Also, European operations are likely to report negative EBITDA/tonne of $75/tonne.
On a consolidated basis, ICICI Direct's preview note said, "the topline is expected to decline 13% YoY, 12% QoQ to ₹52,618 crore. Tata Steel's consolidated EBITDA for Q3FY23E is expected to decline 73% YoY and 29% QoQ to ₹4,279 crore. Consolidated EBITDA margins for Q3FY23E are likely to come in at 8.1% compared to 26.1% in Q3FY22 and 10.1% in Q2FY23. Ensuing consolidated PAT is likely to come in at ₹564 crore, down 94% YoY, 56% QoQ."
Meanwhile, on Tata Steel, Kotak Institutional Equities in their Q3 note said, "We estimate steel realization to decline by 2% qoq (-6% yoy) led by price cuts and contract resets during the quarter. We expect standalone volumes to increase by 1% yoy (+xx % qoq) at 4.45 million tons on a low base. India EBITDA/ton to recover by 41% qoq to Rs12,566/ton (- 61% yoy) led by lower coal costs partly offset by lower realizations."
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First Published:5 Feb 2023, 04:11 PM IST
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