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Prabhudas Lilladher Report
We cut our FY24E/25E Ebitda estimates by 14%/5% on poor performance from TSE. Tata Steel Ltd.'s Q3 consolidated operating performance was better than our estimate on account of stronger Tata Steel India.
Tata Steel Europe continued to disappoint on weak volumes at Tata Steel Netherland, higher operating costs at Tata Steel UK and weak steel pricing.
Tata Steel India Ebitda/tonne of Rs16,905 was above estimates on efficient blending of coking coal and higher sourcing of intermediates. In Q4, Tata Steel Netherland volumes are expected to improve and lower energy costs, higher operating leverage to reduce Tata Steel Netherland losses.
Key parameters to watch are-
progress on closure of Tata Steel UK blast furnaces and
commissioning of Kalinganagar blast furnace and stabilisation which will drive volume growth in FY26E.
We expect revenue/Ebitda/profit after tax compound annual growth rate of 6%/8%/31% over FY23-26E. At current market price, stock is trading at seven times/5.6 times enterprise value of FY25E/FY26E Ebitda.
Retain ‘Accumulate' rating with revised target price of Rs 137 (earlier Rs 140) valuing at six times enterprise value of March-26E TSI Ebitda.
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