Tata Steel Q1 Results Review - Indian Business Firm, However European Overhang Still Persists: Yes Securities

Yes Securities Report

Tata Steel Ltd.’s Q1 FY24 performance was above the consensus estimates, riding on the back of better revenue realisations across geographies. The company has spent Rs 4,089 crores on capital expenditures during the quarter.

Work on five million tonnes per annum expansion at Kalinganagar and electric arc furnace mill of 0.75 mtpa in Punjab is progressing as planned.

Tata Steel Europe however was a drag on the consolidated performance of the steel major, posting a loss of Rs 15,690 million on Ebitda level.

Going forward, the company expects the Netherlands business to start becoming cash flow and Ebitda positive starting H1 FY24 once the blast furnace relining is complete. The BF6 furnace in Netherlands underwent the process of relining in April 2023 and is expected to be completed by the end of Q2 FY24.

The UK business, however, is still struggling on the back of higher energy prices and softer revenue realizations.

On the cost front, Tata Steel had to adjust to the higher cost inventory for coking coal however with the fall in the raw material prices during the start of the quarter, we expect better margin realisations in the upcoming quarter.

We revise our rating from 'Buy' to 'Add' as we believe the stock has shown good returns since the start of the Q2 FY24 on the back of stabilising raw material pricing.

We maintain our positive outlook on the steel story in India and maintain our target price of Rs 133/share for Tata Steel.

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