Tata Steel Q1 Results Preview: Profit Likely To Rise, Revenue May Decline

Tata Steel Ltd. is expected to post a strong set of numbers sequentially as it is set to announce its results for the first quarter of the current financial year on Wednesday.

Analysts tracked by Bloomberg expect the steel maker's net profit to rise to Rs 1,750.8 crore, compared to Rs 1,210.2 crore in the previous quarter.

• Revenue may fall to Rs 51,392 crore vs Rs 54,412.35 crore.

• Ebitda may rise to Rs 6,861.81 crore vs Rs 6,694.47 crore.

• Margins at 13.4% vs 12.3%.

• Net profit may rise to Rs 1,750.82 crore vs Rs 1,210.16 crore.

• The brokerage uses sum-of-the-parts methodology to value the company as the cost, margin profiles as well as growth prospects of businesses vary significantly.

• Values Tata Steel's — all businesses excluding Europe — at an FY27E EV/Ebitda of 7.5 times.

• Downside risks are delayed project execution, decline in steel realisations, adverse impact of sustained higher gas prices on European profitability, and rise in employee costs,

• Concerns around restructuring costs related to TSUK's transition towards EAF steelmaking and profitability trajectory at TSUK post transition, are other downside risks.

• The brokerage expects stronger domestic demand and better-than-expected domestic prices, increase in import tariff/duty, structural improvement in Chinese steel demand.

• Primary steel producer Tata Steel to report 3% year-on-year decline in revenue due to lower steel prices.

• The company likely to report 20% year-on-year Ebitda growth, led by better cost efficiency, operating leverage and supported by better steel prices.

• Favourable steel prices in Europe are likely to help narrow the losses at Tata's overseas operations supporting Ebitda per tonne expansion to approximately $103 per tonne this quarter.

• Tata Steel has done well in improving its share of domestic business, and the balance sheet has strengthened over the past few years.

• However, profitability on a relative basis is likely to struggle given our expectation that growth will lag peers.

• Valuation, against the above backdrop, looks full - F27e P/B of 1.5x for ROE of approximately 15%.

• Improvement in Indian steel demand growth and recovery in steel prices.

• Faster-than-expected improvement in the global macroeconomic environment, thereby driving improvement in the European business.