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Tata Steel: A Strong Quarter - Views on News from Equitymaster
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Tata Steel: A Strong Quarter
Aug 12, 2017

Tata Steel declared its results for the first quarter of financial year 2018 (1QFY18). The company has reported a 19.2% increase in the topline while the bottomline turned positive in 1QFY18. Here is our analysis of the results.

Performance summary:
  • Total Income from operations increased by 19.2% YoY. This is due to strong volume growth and the supportive pricing environment. At a consolidated level, total deliveries increased by 8.6%, whereas realisation increased by 9.9% YoY.
  • Indian market performed considerably well with volume growing by 27.9% YoY largely due to the ramp up of Kalinganagar facility. Realisation increased by 9.2% YoY. Automotive growth regained post demonetization. Branded products and Retail sales grew by 19% YoY and now comprise 48% of total sales.
  • Revenue for South East Asia operations declined by 1.2% YoY. This is on the back a decline in volumes which fell by 7.7% YoY. Volumes declined due to weak market conditions. Realisation, on the other hand, increased by 7% YoY.
  • Europe operation performance was satisfactory, although steel production declined on YoY basis.
  • Tata Steel Europe saw a reduction in deliveries during the quarter following higher deliveries in the seasonally strong 4QFY17. Realisation saw an increase of 15.3% YoY reflecting the improved market conditions and increased sales of differentiated products.
  • Operating profit increased by 51.9% YoY and operating margin stood at 16.8%. EBITDA from Indian operations increased by 30.7% YoY. This is due to supportive realisations, strong growth in deliveries and ramp-up of Kalinganagar plant. The company saw strong growth in branded products, retail and solutions segment which increased 19% YoY.
  • European operations registered a good set of numbers. EBITDA increased by 63% YoY on the back of and currency conditions as well as ongoing improvement programmes.
  • Other income increased by 14% YoY. Depreciation and finance cost increased by 21.3% YoY and 25.5% YoY respectively.
  • Exceptional items rose to Rs 6.16 billion, mainly due to provision for mining related litigation.
  • The company registered a net profit of Rs 9.2 billion after considering the loss from discounted operation.

    Consolidated Financial Performance
    (Rs m) 1QFY17 1QFY18 Change
    Total Income 247,944 295,568 19.2%
    Total Expenses 215,190 245,828 14.2%
    Operating profit (EBITDA) 32,754 49,740 51.9%
    Operating profit margin (%) 13.2% 16.8%  
    Other income 1364 1555 14.0%
    Interest 10707 13437 25.5%
    Depreciation 12378 15011 21.3%
    Profit before tax & exceptional items 11,033 22,846 107.1%
    Exceptional Item -1,678 -6,168  
    Tax 7,403 7,405 0.0%
    Loss from Discontinued Operations -33,925 -121  
    Share of profit / (loss) of associates 142 59 -58.5%
    Net Profit -31,831 9,211  
    Net profit margin (%) -12.8% 3.1%  
    No. of shares (m)   971  
    Basic diluted earnings per share (Rs) ^   -0.5  
    P/E ratio (x) *   N.A  

    (^annualised, * on trailing twelve month earnings)

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