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Tata Steel Q4FY18E Result Expectation

Consensus expectations for Q4FY18E:
  • Revenue – Rs34,423cr, up 3% yoy
  • EBITDA – Rs5,986cr, down 14.8% yoy
  • EBITDA Margin – 17.4%, a contraction of 363bps yoy
  • PAT – Rs2,300cr
Highlights for Q3FY18:
  • Revenue – Rs33,100cr, up 14.5% yoy due to pick up in production volumes across all business segments
  • EBITDA – Rs5,787cr, up 59.1% yoy
  • EBITDA Margin – an expansion of 491bps, supported by strong pricing for steel
  • PAT – Rs1,925cr
Remarks:
  • Tata Steel is likely to continue to benefit from the strong demand and pricing environment for steel. However, due to certain company-specific factors, Tata Steel would report slightly muted results for Q4FY18. The breakdown of a blast furnace at Kalinganagar impacted domestic production and reduced domestic output in Q4FY18 by 4.1% yoy to 3.2mn tonnes. Tata Steel Europe also reported production of 2.62mn tonnes, flat yoy, due to unplanned outages.
  • Tata Steel has announced a series of crucial changes to their business operations.
    • The merger between Tata Steel Europe and ThyssenKrupp has now been delayed to December 2018.
    • The acquisition of Bhushan Steel has yet to be formalized, though it is more a question of timing rather than a possibility.
    • The bid for Bhushan Power looks uncertain to win, as the NCLT has asked the Committee of Creditors to consider Liberty House’s late bid.
    • Tata Steel has announced its intention to divest 5 non-core divisions of its European division. This decision is expected to lower the headcount of Tata Steel Europe by 1,100.
  • Management of Tata Steel is expected to give more clarity on these developments during the investor conference call. This commentary would be crucial in deciding business performance as well as investor sentiment over the next few quarters.

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