Tata Steel: A peep into past II - Views on News from Equitymaster

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

  • MyStocks


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

Tata Steel: A peep into past II

Jun 18, 2008

In the last article , we saw how well Tata steel managed its business during the cyclical downturn of 1999-2003. Now let us have a look at the financial performance of the company during the upturn i.e. between 2003 and 2007, which was also a landmark period for Tata steel as it acquired Corus steel of UK to become sixth largest producer in the world. However, in this article, we will consider only the standalone performance of the companyRising Revenues: The topline of the company during this period grew at a CAGR of 19.1%. Volumes and realizations from saleable steel grew at a CAGR of 6.9% and 12.2% respectively. The four-year period under consideration was an exciting period for the world steel industry. It witnessed major consolidation and capacity expansion. The increasing demand for steel and rising raw material prices significantly impacted the price of steel. The company was able to achieve higher realizations compared to its peers in the industry as it received premium for its product and moreover a well-managed product portfolio added to the topline growth.

Sustained operating profits: The company continued to grow its operating profits at a CAGR of 31.7%, almost similar to the previous four-year period. The company also continued to increase its operating profit margin from 25.7% in FY03 to 38.4% in FY07. The company is recognized as amongst the lowest cost steel producer in the world and it did show up in the company's robust operating margins. Furthermore, when raw material prices were rising significantly, the company experienced a rather low growth in operating expense per tonne, which grew at a CAGR of 6.3% only.

Mounting bottomline: The net profits of the company grew at CAGR of 42.9%, which was significantly higher compared to last period (between 1999 and 2003 it was 37.6%). This again was attributed to increased interest coverage ratio, which climbed from 5.7 in FY03 to 35.4 in FY07. Even the net profit margins showed a rising trend from 11.6% in FY03 to 24.1% in FY07.

After having looked at the performance of Tata Steel over the entire steel cycle, it has belied the notion that commodity companies face troubled times during a downturn. Hence, while investment in such companies may not lead you to strike the proverbial honey pot during an upturn, the chances of you losing a good 40%-50% of your investments during a downturn are also on the lower side.

Equitymaster requests your view! Post a comment on "Tata Steel: A peep into past II". Click here!


More Views on News

TINPLATE 2020-21 Annual Report Analysis (Annual Result Update)

Nov 16, 2021 | Updated on Nov 16, 2021

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

SUNFLAG IRON & STEEL 2020-21 Annual Report Analysis (Annual Result Update)

Nov 15, 2021 | Updated on Nov 15, 2021

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

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.

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.

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

Jul 14, 2021

A peek into Tata Metaliks' stellar June quarter performance.

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.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

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.

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.


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


Dec 7, 2021 (Close)