The stock market today: Tata Steel’s price has climbed about 18% year to date, reflecting the country’s strong steel demand, and is trading at all-time highs. Tata Steel’s share price stays in focus as it reports its April-June 2024 quarter results today. Tata Steel’s share price was trading in the green, up roughly 0.2% in early trades on Wednesday ahead of Q1 results.
Analysts expect a somewhat stronger performance in the steel sector, aided by lower raw material costs such as coal, which may be partially offset by increased iron ore prices.
Volumes in the normally poor quarter are expected to fall sequentially but rise year on year. Key input raw material prices, particularly for coking coal, are now set at USD 275/t.
Firm volume expansion
Tata Steel’s sales volume in India, at 4.94 million tonnes (mt) as reported by the firm on a provisional basis, had grown considerably over 4.79 million tonnes in the year-ago quarter. On a sequential basis, they are lower than the 5.42mt recorded in the March quarter. Not only are sales pushed at the end of a fiscal year, but the impact of Lok Sabha elections has led to some softening.
In the European operations, increased sales in the Netherlands may help to boost revenues and profitability, however, UK sales remained flat sequentially and slightly lower year on year.
According to experts at Motilal Oswal Financial Services, the India business is projected to see normalized volume in 1QFY25, while foreign operations are expected to stay flat.
Prices within a certain range
Soft global steel prices have had an impact on domestic steel prices. The weak Chinese consumption demand leads to increased steel exports from China, keeping prices low.
In 1QFY25, average domestic hot Rolled coil (HRC) prices were stable sequentially at roughly ₹53,630 per tonne, down 7% YoY.
Revenue growth will be slow, but profitability could improve
Tata Steel‘s revenue may climb modestly in the first quarter. Axis Securities analysts estimate consolidated revenue to climb by 1% sequentially (down 0.4% YoY). Motilal Oswal Financial Services predicts that domestic revenues will fall 0.8% year on year, while consolidated revenues will fall 2.5%.
However, profitability may increase in domestic and Netherland businesses.
Domestic operations, aided by lower coal prices and backward integration of iron ore supply, may still be more profitable. The Netherlands may post a positive EBITDA per ton in 1QFY25, leading to an increase in performance. Analysts believe that the UK business may suffer losses, resulting in a decrease in Europe’s EBITDA.
Analysts at Axis Securities predict consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization) to rise by 15% year on year. Elara Securities anticipates a 17.5% increase in EBITDA year on year, whereas MOFSL anticipates a 15% increase in consolidated EBITDA. On a sequential basis, EBITDA may continue to fall due to decreased India volumes.
The key is monitorable:
Key indicators in the outcome include
1. Management views and advice on the way forward in Europe.
2. Management’s guidance on average selling prices and production costs
Read Also: Tata Steel shares: What analysts say about this Tata Group stock after Q4 miss
