Tata Steel is of the largest steel producers, with an annual steel production capacity of ~34 million tonnes per annum. The company is also one of the significantminers of iron ore, manganese, chromite, and coal, much of which gets used internally. Tata Steel is one of the world’s most geographically diversified steel producers, with operations and commercial presence worldwide. It has steel production plans in Europe, India, and Thailand, while mines in as far as Canada.
In the last couple of years, especially during the pandemic, the company reaped the benefit of the commodity boom. In all respects, the fiscal year 2022 was remarkable for the company as it reported its best financial performance and demonstrated significant progress on all strategic priorities. It also emerged as the most profitable Tata Group and India’s second most profitable company.
The Tata Steel share price also jumped significantly as it became the biggest wealth creator for investors in India. However, lately, along with the overall market, the stock has seen some profit booking.
Q4 earnings
In the March quarter or Q4FY22, consolidated revenue for the quarter was at Rs. 69,324 crore, up 39% YoY and 14% QoQ, higher than ICICIdirect’s estimate of Rs. 67,771 crore. Consolidated reported earnings before interest, taxes, depreciation, and amortisation for the quarter were at Rs. 15,030 crore, while adjusted EBITDA was at Rs. 15,891 crore. Consolidated net profits for the quarter came in at Rs. 9,835 crore, up 37 % YoY and 2% QoQ, broadly in line with ICICIdirect’s estimate of Rs. 9,808 crore.
The company also managed to cut down its debt which has been a big challenge. As of FY22, on a consolidated basis, Tata Steel’s net debt to EBITDA was at 0.8 times compared to 2.44 times in FY21, and net debt to equity was at 0.52 times against 0.98 times in FY21. ICICIdirect said it augurs well for the consolidated entity.
Analysts take
Analysts at ICICIdirect said Tata Steel aims to double Indian operations crude steel production capacity to 40 million tonnes by 2030, which will be a crucial trigger for the price-performance. Besides, The NeelachalIspat Nigam share purchase agreement is completed, and the transaction is expected to be closed in Q1FY23, which will also add to the capacity.
The broker has a BUY rating on the Tata Steel share with a target price of Rs. 1,600, based on a sum of the parts valuation.
