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ICICI Securities Report
Tata Steel Ltd. has reported adjusted consolidated Ebitda of Rs 10.4 billion against consensus of Rs 12.9 billion.
While standalone numbers were broadly in-line, Tata Steel Europe disappointed with Ebitda loss of 42/tonne U.S. dollar (expected Ebitda loss of 6/tonne U.S. dollar).
Tata Steel Ebitda has gains on account of sales of emission rights and wage support from European and U.K. governments, while exchange fluctuations impacted. Lower volumes in standalone operations (down 30% YoY) impacted Ebitda.
Management did highlight Rs 20 billion in costs remain unabsorbed due to lower volumes i.e operating leverage impact. Free cash flow generation has been very impressive at Rs 7 billion for the group.
This has helped maintain net debt QoQ. Tata Steel remains our top pick, as earnings tailwind (domestic price increases plus impending price increase in Europe) and elevated net debt to market cap augurs well.
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