- Tata Steel’s share price has surged over 60% this year, nearing its 52-week high of ₹177.70 achieved on May 27.
- Investor confidence remains high due to strong domestic demand and rising commodity prices, with a potential rebound in Chinese demand.
- “Tata Steel’s performance in Q4 is under scrutiny as the company prepares to release its results today,” said a market analyst.
Get the latest insights on Tata Steel’s Q4 performance and what analysts expect for the future.
Strong Volume Growth
Tata Steel’s domestic sales volume for the quarter ending March 2024 reached 5.41 million tonnes (mt), marking a 5% increase from 5.15 mt in the same quarter last year and a 10% sequential rise. Domestic steel production also improved, reaching 5.38 mt compared to 5.15 mt in the previous year and 5.35 mt sequentially.
European Operations
Tata Steel Europe reported a sales volume of 1.40 mt for its Netherlands operations, an improvement from 1.3 mt in the previous quarter but lower than 1.48 mt in the same quarter last year. UK sales volume stood at 0.69 mt, slightly up from 0.64 mt in the December quarter but down from 0.76 mt in the year-ago quarter.
Lower Steel Prices to Limit Revenue Growth
Analysts have noted a 4-5% sequential decline in steel prices for flat and long steel products. Kotak Institutional Equities expects standalone steel realizations to decrease by 3% sequentially, though they are up 0.2% year-on-year. Tata Steel’s standalone revenues are projected to decline by 6.1% sequentially but rise by 6.9% year-on-year.
Profitability May Decline
PhillipCapital estimates Tata Steel’s Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) at ₹7,601.2 crore, a decline of 7.9% sequentially and 6.5% year-on-year for domestic operations. EBITDA per tonne is expected to fall by 16.9% sequentially and 13% year-on-year to ₹14,050. Kotak analysts also foresee a 15% sequential and year-on-year decline in India EBITDA per tonne to ₹14,319, primarily due to lower realizations.
European Losses to Decline
PhillipCapital projects Tata Steel Europe’s revenues at $2,532 million, a 16% sequential rise but a 5.5% year-on-year decline. EBITDA loss is expected to reduce significantly to $182 million from $335 million in the previous quarter and $200 million in the year-ago quarter.
Key Monitorables
Analysts will closely watch management’s commentary on European operations, annual selling prices, and cost of production across geographies. The capex timeline and updates on the Blast Furnace status in the Netherlands will also be key areas of focus.
Conclusion
As Tata Steel prepares to release its Q4 results, investor focus will be on the company’s ability to navigate the challenges posed by lower steel prices and rising input costs. While domestic demand remains robust, the performance of European operations and management’s guidance will be critical in shaping future expectations.
