Tisco: The cycle is turning - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Tisco: The cycle is turning

Apr 3, 2002

It was one of the challenging years for the Indian steel companies with price realizations witnessing a sharp drop and increasing demand supply gap. Tisco, however managed to report volume growth in sales for the first nine months of the current fiscal. The company’ sales volumes increased by 5% during the period April – December 2001 to 2.5 m tonnes. This was 74% of the total sales of the company at 3.4 m tones in FY01. Tisco’s fourth quarter volume sales are expected to improve with a gradual pick up in steel demand and an up tick in steel prices internationally. Tisco is expected to report about 2-3% revenue growth in the fourth quarter of the year.

Financial snapshot
(Rs m) 9m FY01 9m FY02 Change FY01 FY02E Change
Gross Sales 54,060 54,466 0.8% 77,594 70,580 -9.0%
Other Income 398 476 19.7% 551 535 -2.9%
Expenses 42,113 45,376 7.7% 60,574 58,391 -3.6%
Operating Profit 12,345 9,566 -22.5% 17,571 12,724 -27.6%
Interest (net) 2,692 3,065 13.9% 3,766 4,210 11.8%
Depreciation 3,552 4,028 13.4% 4,923 5,385 9.4%
Profits before Tax 6,101 2,474 -59.5% 8,883 3,129 -64.8%
Tax 310 41 -86.8% 490 44 -91.1%
Extraordinary Items (2,348) (1,608) -31.5% (2,858) (2,056) -28.1%
Net Profit 3,443 824 -76.1% 5,534 1,030 -81.4%
Equity shares (m) 368 368   368 368  

Key ratios
Particulars 9m FY01 9m FY02 FY01 FY02E
OPM 22.1% 16.7% 21.9% 17.3%
NPM 10.6% 4.4% 10.7% 4.3%
Cash EPS (Rs) 25.3 17.5 28.4 17.4
EPS (Rs)* 20.9 8.8 22.8 8.4
* Excluding extraordinary items

The Golden Quadrilateral highway project is also expected to increase steel consumption in the country. The project is expected to consume over 1 m tones of steel. This would help in reducing the excess capacity in the steel industry to an extent. Tisco has already decided to hike prices of its long steel products (used in the construction industry) by Rs 1,000 per tonne.

The company is continuously initiating measures to improve its volume growth amidst sliding steel prices. It has recently signed a technical marketing agreement with Nippon Steel of Japan with effect from April 1, 2002 for 3 years. As per the agreement, Nippon Steel will take Tisco’s CR automotive steel into the market for higher end applications. The company is also diversifying its export markets to Bangladesh, Malaysia, China, South Korea, Taiwan and some of the African countries.

Among other new developments, Tisco is planning to zero in on South Africa as the location for its proposed 120,000 tones ferro chrome project entailing an investment of Rs 3 bn. Tisco aims to leverage on lower per unit power cost in South Africa at 60 paise compared to over Rs 4 per unit in India. To know more read Tisco: On African Safari

Sluggish demand scenario and lower sales realizations have hit Tisco’s earnings potential in FY02. Its net profits would be one of the lowest in the last five years, a compounded annual decline of over 11% in the last six years.

At the current market price of Rs 100, Tisco is trading at a P/E of 12x FY02 projected earnings. Over the last five years, the company’s stock has traded in the average P/E range of 8-20 times. Tisco’s marketing initiatives coupled with a revival in steel demand and prices globally are likely to improve its revenue growth in FY03. Its ongoing cost control measures would help the company in increasing its operating margins and consequently, higher earnings. The company’s earnings are expected to increase by over 30% in FY03.

Equitymaster requests your view! Post a comment on "Tisco: The cycle is turning". Click here!

  

More Views on News

Do Metal Stocks Really Track Metal Prices? (Views On News)

Sep 11, 2021

A close look at the performance of base metals and key companies in that sector.

A Peek into Tata Steel's Stellar June Quarter Performance (Views On News)

Aug 13, 2021

Tata Steel's June quarter profits were higher than the full-year profits reported for fiscal 2021.

TATA STEEL 2020-21 Annual Report Analysis (Annual Result Update)

Jul 8, 2021 | Updated on Jul 8, 2021

Here's an analysis of the annual report of TATA STEEL for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of TATA STEEL. Also includes updates on the valuation of TATA STEEL.

Tata Metaliks Share Price Jumps 8% After Turning Profitable (Views On News)

Jul 14, 2021

A peek into Tata Metaliks' stellar June quarter performance.

Shyam Metalics IPO: Key Points to Consider (Views On News)

Jun 12, 2021

Shyam Metalics is commanding a strong grey market premium ahead of its IPO next week.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

TATA STEEL SHARE PRICE


Dec 9, 2021 (Close)

TRACK TATA STEEL

  • Track your investment in TATA STEEL with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

TATA STEEL - GRAND FOUNDRY COMPARISON

COMPARE TATA STEEL WITH

MARKET STATS