Shares of Tata Steel were trading lower today after the metal firm reported a weak set of earnings for the quarter ended December 2022. Tata Steel logged a net loss of Rs 2,502 crore for the quarter ended December 31, 2022 as against net profit of Rs 9,598 crore in the year-ago period on account of higher expenses. Subsequently, shares of Tata Steel opened with a loss of 4.76% at Rs 112 against the previous close of Rs 117.60 on BSE today.
The stock has lost 3.75% in a year and risen 1.07% this year. At 10:02 am, Tata Steel shares were trading 3.23% lower at Rs 113.80. Total 30.09 lakh shares changed hands amounting to a turnover of Rs 34.22 crore on BSE. Market cap of Tata Steel fell to Rs 1.39 lakh crore. The stock hit a 52-week high of Rs 138.63 on April 6, 2022 and a 52 week low of Rs 82.71 on June 23, 2022. Later, the Tata Steel stock ended 5.23% lower at Rs 111.45 on BSE. Market cap of the firm fell to Rs 1.36 lakh crore.
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In terms of technicals, the relative strength index (RSI) of Tata Steel stands at 47.9, signaling it's neither oversold nor undersold. Tata Steel stock has a one-year beta of 1.2, indicating high volatility during the period. Tata Steel shares are trading higher than the 100 day and 200 day moving averages but lower than 5 day, 20 day and 50 day moving averages.
Tata Steel’s revenue from operations slipped 6% to Rs 57,084 crore in Q3FY23 as compared to Rs 60,783 crore in Q3FY22.
Net debt stood at Rs 71,706 crore, with net debt to EBITDA at 1.76x and net debt to equity at 0.65x.
T V Narendran, Chief Executive Officer & Managing Director, said: “Tata Steel has delivered steady growth in India volumes despite the volatile operating environment. Domestic deliveries stood at around 13.7 million tons in the first nine months of the financial year and were up 4% YoY. Broad based growth was witnessed across most segments. For the quarter, domestic deliveries were up 11% YoY and grew at a faster pace than India apparent steel consumption aiding in retaining market leadership position across chosen segments. Our crude steel production touched 5 million tons in 3QFY23 for the first time in India, with Neelachal Ispat Nigam limited commencing operations.”
Consolidated EBITDA stood at Rs 4,154 crore, with an EBITDA margin of 7% in the last quarter. sharp drop in realisations and spreads in Europe affected profitability.
For the India business, the company logged a profit of Rs 1,918 crore with a revenue of Rs 32,325 crore for the period under review.
On the outlook, Tata Steel said there was a visible pick up in steel prices across key regions on improved China demand outlook and sustained spending on infrastructure in India.
Abhijeet from Tips2trade said, "Poor Q3FY23 results have led to a gap down opening in Tata Steel stock price with major resistance at Rs 117.5. A daily close below Rs 102.5 could lead to lower targets of Rs 108-101.65 in the near term."
Prashanth Tapse, Research Analyst, Sr VP Research at Mehta Equities said, "Tata Steel reported net loss surprising the markets due to sharp drop in realisations in European region. European business segment suffered a lot due to slowdown in demand followed by recession concerns weighing on steel prices, which coupled with elevated variable costs affected the performance. While Domestic business delivered a steady growth in volumes and as well as profitability with improvement in product mix despite the volatile operating environment. On long term, we remain optimistic on Tata Steel."
Morgan Stanley is equal-weight on the Tata Steel stock. It has given a target price of Rs 110.
“Standalone EBITDA is much weaker & consolidated EBITDA is slightly better vs. Morgan Stanley estimates but missed consensus estimates by 32%. Europe business was much weaker than expected. Large deferred tax expenses towards BSPS drove net loss of Rs 2200 crore at the consolidated level,” Morgan Stanley said.
CLSA has given a buy call to the firm with a target price of Rs 135.
“EBITDA of Rs 4050 crore largely in line However, adjusted EBITDA has come much lower at Rs 2730 crore. Adjusted standalone EBITDA per tonne of Rs 10,377 lower than estimates. Europe EBITDA /tonne fell US$114 QoQ to -ve $95/t. Net debt was broadly flat at Rs 71700 crore ,” said the international brokerage.
Ahead of the earnings, Nuvama Institutional Equities expected Tata Steel to report a 96 per cent YoY fall in net profit at Rs 394 crore compared with Rs 9,766 crore in the year-ago quarter. Revenue was likely to fall 12 per cent YoY to Rs 53,499.40 crore compared with Rs 60,783 crore in the year-ago quarter.
Elara Securities expected profit to come at Rs 353.70 crore. It saw revenue falling 8.9 per cent YoY to Rs 55,119.40 crore. Centrum Broking expected a profit of Rs 598.40 crore. It saw revenue for the quarter falling 10.3 per cent YoY to Rs 54,552 crore.
However, net loss of the firm in Q3 came at Rs 2,502 crore for the quarter ended December 31, 2022 was much lower to the estimates and led to weak sentiment around the stock.
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