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Tata Steel's (TATA) consolidated adjusted PAT declined 75% QoQ to INR3.6b. Reported PAT of INR2.1b included a
forex loss of INR1.5b. A high effective 87% tax rate dragged down PAT.
Tata Steel Europe (TSE) reported EBITDA of USD103m, in line with estimate. EBITDA per ton declined sharply by
USD46/ton to USD32/ton, squeezed by falling steel prices and higher coking coal costs. Tata Steel India's (TSI)
EBITDA per ton was USD380/t, which was a tad lower than estimate due to higher-than-expected other expenditure.
Consolidated EBITDA was affected by the elimination of USD77m on losses of smaller subsidiaries and intercompany
transfer of raw material. Smaller subsidiaries (such as South Africa and Dhamra Port) will continue to contribute a
negative USD30m-40m to consolidated EBITDA for a few more quarters.
Effective tax rate was high as some of the units still reported profit while there was a collective loss as a group of
subsidiaries. Going forward, effective consolidated tax rates will remain volatile depending on profitability of various
subsidiaries.
TSE's margins will come under pressure due to weakening steel prices while raw material costs will be sticky for the
next six months, despite weakening iron ore and coking coal prices on the spot market.
Despite weaker demand, TSI remains in sweet spot, due to the depreciation of the rupee against the US dollar and
iron-ore supply issues facing other Indian steel producers.
We are cutting our FY12 EPS by 46% to model weaker performance of subsidiaries in 2QFY12 and in 2HFY12. We
cut FY13 EPS 15% to factor in lower volume guidance for Indian operations to 8.3mt against 9mt earlier. The stock
trades at a PE of 6.4x and EV/EBIDA of 4.7x FY13E. Maintain Buy.
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Tata Steel's (TATA) consolidated adjusted PAT declined 75% QoQ to INR3.6b. Reported PAT of INR2.1b included a
forex loss of INR1.5b. A high effective 87% tax rate dragged down PAT.
Tata Steel Europe (TSE) reported EBITDA of USD103m, in line with estimate. EBITDA per ton declined sharply by
USD46/ton to USD32/ton, squeezed by falling steel prices and higher coking coal costs. Tata Steel India's (TSI)
EBITDA per ton was USD380/t, which was a tad lower than estimate due to higher-than-expected other expenditure.
Consolidated EBITDA was affected by the elimination of USD77m on losses of smaller subsidiaries and intercompany
transfer of raw material. Smaller subsidiaries (such as South Africa and Dhamra Port) will continue to contribute a
negative USD30m-40m to consolidated EBITDA for a few more quarters.
Effective tax rate was high as some of the units still reported profit while there was a collective loss as a group of
subsidiaries. Going forward, effective consolidated tax rates will remain volatile depending on profitability of various
subsidiaries.
TSE's margins will come under pressure due to weakening steel prices while raw material costs will be sticky for the
next six months, despite weakening iron ore and coking coal prices on the spot market.
Despite weaker demand, TSI remains in sweet spot, due to the depreciation of the rupee against the US dollar and
iron-ore supply issues facing other Indian steel producers.
We are cutting our FY12 EPS by 46% to model weaker performance of subsidiaries in 2QFY12 and in 2HFY12. We
cut FY13 EPS 15% to factor in lower volume guidance for Indian operations to 8.3mt against 9mt earlier. The stock
trades at a PE of 6.4x and EV/EBIDA of 4.7x FY13E. Maintain Buy.