Tata Steel Q1 FY23 Earnings: Profit Declines but Beats Estimates

Tata Steel reported its June quarter results on Monday evening and the numbers were the key expectation. The share price of Tata Steel was trading at Rs 956.35 per share, down 0.45% on Tuesday afternoon.

Tata Steel Q1 FY23: Key Earnings Highlights

• Net Profit: Rs 7,465 crore, down 12.8% year-on-year
• EBITDA: 15,047 crore, down 7%
• Margins: EBITDA margins improved 24%

Let us look at all the numbers of Tata Steel for the June quarter in detail:

Tata Steel Q1 Results 2022: Profit declines 

Tata Steel has reported a decline in net profit in the April-June 22 period, because of the higher pet coke prices. It increased operating costs. The export duty imposed by the Indian government choked up the exports which hurt the volumes.

The company's net profit declined by 12.8% to Rs 7,465 crore, beating analyst estimates. Analysts had earlier estimated a profit of about Rs 7,199 crore. The company had reported a profit of about Rs 8,907 crore in the same period last year. Sequentially, the profit declined from Rs 9,835.12 crore.

Tata Steel Q1 FY23: Revenues Increase

Revenue rose to Rs 63,430 crore, up 18.6% on-year. Analysts had expected a profit of about Rs 63,230 crore. Sequentially, the revenue declined 8.5% from Rs 69,323 crore. Revenues were broadly stable as improvement in net realizations more than offset the drop in volumes. Tata Steel India reported a revenue of Rs 83,625 per ton due to long-term contracts and product mix. Europe Operations reported revenue per ton increased to £1,248 per ton.

Tata Steel Q1 FY23: Operating profits and margins

The operating profit (or EBITDA) was flat sequentially and was down 7% year on year to Rs 15,047 crore. The EBITDA margins improved from 26.1% in the previous quarter to 24% in the June quarter. EBITDA per ton increased to Rs 22,717. The EBITDA per ton remained flat year on year.

The EBITDA of India operations was Rs 9,582 crores, translating to EBITDA per ton of Rs 23,557. The European operations achieved the highest ever quarterly EBITDA at £621 million, translating to EBITDA per ton of £290.

Tata Steel Q1 FY23: Debt reduction

Gross debt stood at Rs 54,504 crore with Net debt to EBITDA at 0.87x and Net Debt to equity at 0.48X.

Tata Steel Q1 Results: Update on India business

Deliveries of India business were marginally lower by 2% year-on-year due to moderation in exports following the imposition of a 15% export duty. Consequently, domestic deliveries were successfully ramped up by leveraging a strong marketing network and agile business model.

Tata Steel Q1 FY23: Tata Steel Long Products 

Tata Steel Long Products, a subsidiary of Tata Steel, completed the acquisition of Neelachal Ispat Nigam Limited on 4th July 2022.

Tata Steel Q1 Results 2022: Update on stock split

Tata Steel's 10:1 stock split has received all required approvals and July 29 has been set as the record date to give effect to the split.

Tata Steel Q1 FY23: Management Commentary

“This has been a challenging quarter for the Global and Indian economy with rising interest rates, supply chain constraints, and a slowdown in China due to COVID, but despite these multiple headwinds, Tata Steel has delivered a strong performance with an improvement in margins”, T V Narendran, CEO & MD on the performance for the quarter.

Tata Steel Q1 FY23: Analysts' Views

JP Morgan: The firm has given an OVERWEIGHT call on the stock with a target at Rs 1,400 per share, an upside of 45% from the current market price. The company witnessed a substantial all-around beat driven by Europe. Generally, Q2 is seasonally weak, H2 should rebound with a large Q1 beat on Europe's EBITDA per tonne at $365 per tonne. Steel prices bottomed in India given steady underlying demand and limited imports.