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- 15 Nov 2021
- ICICIdirect Research
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TATA STEEL: MIXED BAG; DOMESTIC OPERATIONS DISAPPOINTS; EUROPEAN OPERATION SURPRISES POSITIVELY…
TATASTEEL - 140 Change: -0.02 (-0.01 %)What’s Buzzing:
Tata Steel reported a mixed performance for Q2FY22 wherein EBITDA of European operations more than doubled sequentially but EBITDA per tonne of domestic operations declined on a QoQ basis.
Context:
For Q2FY22, Tata Steel European operation EBITDA/tonne was at US$211/tonne, which more than doubled on a QoQ basis (for Q1FY22, Tata Steel European operation was at US$89/tonne). However, Tata Steel standalone operations EBITDA/tonne for Q2FY22 was at Rs.30739/tonne compared to Rs.32712/tonne in Q1FY22. Tata Steel standalone EBITDA/tonne numbers (both for Q1FY22 and Q2FY22) take into account Tata Steel BSL’s merger into Tata Steel.
Our Perspective:
Over the last few months coking coal price has been on a rising trend. For Tata Steel Indian operations, coking coal costs are expected to increase by ~US$100/tonne during Q3FY22 when compared with Q2FY22. In terms of realisation, during Q3FY22 Tata Steel Indian operation realisation is expected to increase by ~Rs.2500/tonne compared to Q2FY22. For the Tata Steel Indian operation, as the increase in coking coal costs is expected to be higher than increase in realisation, domestic operation EBITDA/tonne is likely to decline from Q2FY22 level. On the demand side, aided by upcoming festive season, H2FY22 domestic steel demand is expected to be higher than H1FY22 (H1FY22 – Domestic steel demand was ~49 MT).