Tata Steel’s Net Profit Failed To Beat Street Estimates

Tata Steel, one of the largest integrated private sector steel company globally, posted a decent set of numbers in its Q3FY14. However, it failed to meet the street expectation. On consolidated basis, Tata Steel posted a net profit of Rs 503.24 crore against Rs 751 crore, which was the consensus estimates according to data compiled by Thomson Reuters StarMine. Nonetheless, on revenue front the company was able to beat the consensus estimates and posted total revenue for the quarter at Rs 36735.82 crore against street estimates of Rs 33652 crore.  On yearly basis, profit and sales of the company has increased by 166% and 14% respectively. The reason for better performance in the topline is growth in volumes in addition to realisations. On yearly basis, deliveries have increased by 9.4 % to 6.38MnT for Q3FY14. 

The EBITDA of the company has increased by 74% on yearly basis due to better cost control. The total cost has increased by mere 9% in the same period and as percentage of sales has declined by almost 400 basis points. The EBITDA/tonne too saw a spike of almost 60% and was at Rs 6149/tonne for Q3FY14. The Indian operation continues to perform well and EBITDA/tonne was at Rs 15155 for Q3FY14. 

Net earnings per share of the company came at Rs 4.73 for Q3FY14 against a loss of Rs 8.32 at the end of Q3FY13. Shares of Tata Steel are currently trading at Rs 376.9 down by 3.4% from previous closing.  In trailing twelve month the company’s earnings per share is still negative. However, looking at the improving condition in Europe, which contributes majority of revenue, the stock is likely to do well in the next one year.