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Tata Steel: India and SEA Shine; Europe Whines - Views on News from Equitymaster

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Tata Steel: India and SEA Shine; Europe Whines

Nov 3, 2017

Tata Steel declared its results for the second quarter of the financial year 2018 (2QFY18). The company has reported a 25.2% increase in the topline while the bottomline turned positive in 2QFY18. Here is our analysis of the results.

Performance summary:
  • Total Income from operations increased by 25.2% YoY. This is due to strong volume growth and the supportive pricing environment. At a consolidated level, total deliveries increased by 15% YoY, whereas realization increased by 8.9% YoY.
  • Indian market performed considerably well with volume growing by 17.6% YoY largely due to the ramp up of Kalinganagar facility. Realization increased marginally by 3.2% YoY. The automotive segment delivered robust volume growth of 34%YoY. Branded products, Retail & Solutions segment grew 14%YoY.
  • The revenue from South East Asia operations increased by 23.3% YoY. This is on the back of an increase in volumes which increased by 13% YoY. Realization also increased by 9.1% YoY.
  • Europe operation performance was good at the revenue level. The revenue increased by 25% YoY on the back of an increase in volumes (up by 15% YoY) and improvement in realization (up by 8.6% YoY).
  • Operating profit increased by 53.7% YoY and operating margin stood at 14.5%. EBITDA from Indian operations increased by 71% YoY driven by improved realizations and higher volumes.
  • European operations witnessed a subdued performance at EBITDA level in the second quarter. Fall in HRC prices and relatively lesser fall in costs resulted into narrower spread.
  • Other income increased by 132.6% YoY. Depreciation increased marginally by 0.4% YoY. On the other hand, finance cost declined marginally by 0.1%.
  • The company registered a net profit of Rs 10.1 billion, compared to a net loss of Rs 494 million 2QFY17.

    Consolidated Financial Performance
    (Rs m) 2QFY17 2QFY18 Change 1HFY17 1HFY18 Change
    Total Income 259,211 324,641 25.2% 508,856 621,214 22.1%
    Total Expenses 228,500 277,435 21.4% 445,391 524,268 17.7%
    Operating profit (EBITDA) 30,711 47,207 53.7% 63,465 96,947 52.8%
    Operating profit margin (%) 11.8% 14.5%   12.5% 15.6%  
    Other income 1,089 2,532 132.6% 2,452 4,087 66.7%
    Interest 13,510 13,499 -0.1% 24,217 26,936 11.2%
    Depreciation 14,669 14,733 0.4% 27,047 29,744 10.0%
    Profit before tax & exceptional items 3,620 21,507 494.1% 14,653 44,353 202.7%
    Share of profit /(loss) of JVs & Associates -91 198   51 257  
    Exceptional Item -593 -447   -2271 -6614  
    Tax 3,634 11,380 213.2% 11,036 18,785  
    Net profit -697 9,879   1,397 19,211  
    Profit from Discontinued Operations 203 299   -33,722 178  
    Consolidated Net Profit -494 10,178   -32,325 19,389  
    Net profit margin (%) -0.3% 3.0%   0.3% 3.1%  
    No. of shares (m)         971  
    Basic diluted earnings per share (Rs) ^         10.4  
    P/E ratio (x) *         68  

    (^annualised, * on trailing twelve month earnings)

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