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Target: ₹128
CMP: ₹135
Tata Steel reported adjusted Consol EBITDA of ₹5,740 crore, up 33 per cent q-o-q (CentrumE: ₹4,720 crore) primarily due to outperformance at standalone business offsetting Europe losses. The standalone business adj EBITDA stood at ₹8,250 crore (CentrumE: ₹7,110 crore); up 20 per cent q-o-q primarily due to cost saving from captive pellet utilisation, blending of lower grade coking coal and lower purchase cost of semi products.
The blended realisation was flattish q-o-q offset by marginal rise in sales volume q-o-q. As a result, Adj EBITDA/t stood at ₹16,905/t (Centrum: ₹14,574/t) up 19 per cent q-o-q. Tata Steel Netherlands relining of BF is expected to complete by Jan-24 end and UK business to shut its BF fully by CY24 end.
For Q4FY24, management guided lower steel prices and higher raw material cost to impact domestic margins. For Netherlands margins to further deteriorate while steel price increase due to red sea crisis to lower some losses in UK. We factored in higher losses in Europe for FY24 and expect delay in UK transition to lead FY25 also into losses. As a result, our target price has reduced to ₹128 (Earlier: ₹133).
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