Tata Steel’s Stock Rallies As Subsidiaries’ Profit Surges, Debt Falls In Q4

Tata Steel Ltd. was among the top performers on the Nifty 50 after the steelmaker’s subsidiaries reported a surge in quarterly net profit and volumes, and a fall in gross debt.

Tata Steel BSL Ltd., which contributes nearly a fifth of the parent’s consolidated operating income, posted a standalone profit of Rs 1,897 crore in the quarter ended March against a net loss of Rs 1.9 crore a year ago, according to an exchange filing.

• Its operating income jumped more than threefold year-on-year to Rs 2,566.2 crore. That, Motilal Oswal said, was because of higher-than-expected volumes and realisation.
• The company’s realisation, according to BloombergQuint’s calculations, stood at Rs 61,367 a tonne, up 40.7% over the year earlier and 19.9% sequentially.
• Its Ebitda per tonne came at Rs 21,510, up 172% year-on-year and 52% over the preceding quarter.
• Tata Steel BSL’s gross debt fell 34.2% year-on-year to Rs 11,452 crore for the quarter ended March.
• Its sales volumes rose 21.7% year-on-year and 3.8% sequentially at 1.2 million tonnes.

Tata Steel Long Products Ltd.

This unit of Tata Steel reported earnings at Rs 339.8 crore in the quarter ended March against a loss of Rs 133.2 crore a year ago. The profit after tax rose 11.7% over the preceding quarter.

• Its operating income jumped 3.65 times year-on-year to Rs 497.8 crore.
• Volumes are up at 0.34 million tonnes, a rise of 14% over the year earlier and 3.6% sequentially.
• Realisation stood at Rs 45,094 a tonne, up 34.6% year-on-year and 9.4% over the preceding three months.
• Ebitda per tonne came at Rs 14,514, up 221% year-on-year and 17.3% sequentially.

According to Morgan Stanley, Tata Steel Long’s results cannot be extrapolated to standalone or other subsidiaries. The key takeaway is the strong focus on robust cash flow generation and deleveraging. The research firm expects the company’s margin to remain strong in first quarter of FY21.

Its gross debt fell by half over the year earlier to Rs 1,320 crore in the reported quarter.

Shares of Tata Steel gained as much as 5% around 2 p.m. Of the 32 analysts tracking the company, 27 have a ‘buy’ rating. The stock is trading close to the 12-month consensus target price of Rs 963 a share.