BackTata Steel tumbles over 5% on weak Q3 numbers
Several brokerages slashed their target price for the stockThe company reported net loss of ₹1228.53 crore in Q3
PremiumMumbai: Shares of Tata Steel Ltd on Monday slipped 5.4%, the highest fall in two months, as the company reported weak numbers for the December quarter and as several brokerages slashed their target price for the stock.
At 1102 am, the stock was trading at ₹446.45 apiece on the BSE, down 5.2% from its previous close.
The company reported a net loss of ₹1228.53 crore in the third quarter of this fiscal against a profit of ₹1753 crore a year ago.
Consolidated revenue fell 8.9% year-on-year to ₹35,520 crore in October-December. Earnings before interest, tax, depreciation and amortization (Ebitda) nearly halved to ₹3,659 crore in Q3, from ₹6,726 crore in the previous year, while Ebitda per tonne fell to ₹5,003 from ₹10,404 in Q3 FY19.
Tata Steel’s net profit from India operations was ₹1,194 crore, down 47% year-on-year. Revenue fell 4.6% to ₹21,299 crore even though steel sales rose 25% in the quarter to 4.85mt.
For Europe operations, the company reported its worst-ever quarterly performance with an EBITDA loss of ₹960 crore. While analysts expect EBITDA to recover in January quarter given better steel spreads, the purchase of carbon credits would put a lid on profits.
"Tata Steel reported a substantial miss on adjusted earnings majorly led by EBITDA loss at Europe and partially due to weak domestic margins. Domestic margins should recover from 4QFY20 due to a surge in prices. However, cost reduction initiatives in Europe are taking longer to yield results and we expect cash breakeven only from 2HFY21E. The company is prudently delaying growth capex to contain leverage," said Kotak Institutional Equities in a note to its investors.
Kotak has cut its EBITDA estimates by 14-8% for fiscal 2020-21 and slashed its target price to ₹560 a share from ₹600.
"While steel margins are likely to improve in the near term, the impact of carbon costs would keep TSE margins under check. Successful completion of the announced TSE business restructuring and the turnaround of the acquired Bhushan assets hold the key to achieve the guided USD1b net debt reduction in FY21," said brokerage firm Motial Oswal in a note to its investors. The brokerage firm has cut its target price by 4% to ₹450 a share.
Brokerage firm Investec has reduced its target price to ₹515 from ₹560, while Edelweiss Securities has cut its target price to ₹570 from ₹590 a share. Brokerage firm Philip Securities has downgraded the stock to neutral from buy and kept its target price at ₹476.83 a share.
The stock currently has 22 buys, four holds and four sell ratings, according to Bloomberg.
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