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Business News/ Markets / Stock Markets/  Tata Steel Q3 : Lower realisations in Europe may impact consolidated revenues, earnings performance
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Tata Steel Q3 : Lower realisations in Europe may impact consolidated revenues, earnings performance

Tata Steel Q3 results today: The domestic operations are expected to see double digit revenue growth and earnings performance however it is the lower European realizations that may pull down consolidated financials, as per analysts.

Tata Steel Q3 Result preview: Weak European realizations to impact consolidated performancePremium
Tata Steel Q3 Result preview: Weak European realizations to impact consolidated performance

Tata Steel Q3 Preview: Tata Steel domestic operations are expected to continue reaping benefits of strong steel demand in the country and some improvement in realizations sequentially. As input costs pressures weigh, the losses in European operations however may take away some benefits and impact overall consolidated performance.

The steel demand in the country remains strong led by government driven infrastructure push and is favorable for Steel manufacturers. The benefits though are being reaped by steel manufacturers; however, the December quarter may see some impact of festival season, state elections in some states, rains in South India that may lead to volume growth remaining slightly muted.

The steel prices that started moving up in Q2 and continued to move northward till October, may lead to some improvement in steel prices sequentially benefitting manufacturers as Tata Steel, the rise in raw material prices as that of coking coal and iron-ore however may remain a spoilsport for manufacturers.

Overall the performance is expected to remain a mixed bag.

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Tata Steel- Q3 expectation

Analysts at Elara Securities India Pvt Ltd in their Q3 result preview said that they expect a uptick in steel prices to provide relief to steel firms in their steel coverage universe. However, this benefit might be partly offset by higher coking coal prices and softer volume. Following a challenging pricing environment in Q2FY24, average prices in Q3FY24 for flat and long products showed a recovery in the range of 1-4% sequentially. Thus, they expect blended realization for most steel firms, to improve in the range of 1,500-2,500 per tonne sequentially. For Tata Steel they expect volumes to remain flat yoy

Provisional sales volume in India for Tata Steel grew by 1.2% sequentially to 4.88 MT, led by higher domestic sales on account of strength in domestic demand. Steel production volumes stood higher vis-a-vis sales volumes at 5.32MT, up 6% yoy and sequentially, implying some inventory build-up said analysts at Axis Securities. 

Analysts at PhillipCapital Research expect the domestic Realizations to rise 2% sequentially for Tata Steel which will drive the improvement in Earnings before interest Tax depreciation and amortisation (Ebitda),

Tata Steel Europe performance, however, may remain a drag on Tata steel consolidated. Losses are expected to continue due to seasonal weakness and lower realisations said analysts at PhillipCapital. They expect sequential better standalone performance for Tata Steel, while Europe will see further losses.

Those at Axis Securities model an expanded Ebitda per tonne  loss of $180 in Europe versus a loss of $137 in Q2FY24 on account of lower sales volume and sales realization, which could be only partially offset by lower coking coal consumption costs, they said.

Analysts at Motilal Oswal Finacial Services estimate Tata Steel Consolidated revenues at around 61400 Crore to grow 7.6% year-on-year and 10.3% sequentially. The Ebitda may rise 23.9% yo-y and 17.6% sequentially to 5000 Crore as per MOFSL estimates\

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The adjusted Net profit at 600 Crore may improve from reported Loss nevertheless may still be 18.2% lower sequentially.

Key Monitorable-

 Analysts remain watchful on 

  1. Management commentary on European operations especially the UK that is critical

2) Management guidance on average selling Price and Cost of production across geographies .

3) Analysts await details on debt reduction and capex timeline, which will double the domestic capacity by FY30.

4)  Analysts await an update on the BF status in the Netherlands

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions

 

 

lso 

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ABOUT THE AUTHOR
Ujjval Jauhari
Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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Published: 24 Jan 2024, 10:55 AM IST
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