TATA STEEL

Source: The Hitavada      Date: 12 Mar 2017 09:30:09


TOP takeaways from Q3FY17: Strong steel deliveries and higher ferro alloy prices boosted
standalone sales and aided profitability. Standalone operating profit was Rs 33.8bn (36%
beat); Expenses related to plant shutdown at Netherlands (~ú34mn) hampered the European business profitability; OP/tonne stood at US$ 38 (our estimate of US$ 60); Consolidated operating profit was Rs 35.4bn, driven by standalone business partly offset by Europe. Adjusting
to Rs 3bn forex loss, profits beat estimates by 10%; Net debt increased to Rs 766.8bn from Rs 755.6bn in September, 2016.

Outlook and Valuation: Strong results driven by higher India profitability. Outlook on the profitability continues to stay positive while developments on the UK pension issue are progressing well. We tweak our operating profit estimates while cut our EPS estimates to factor in higher interest costs.

Re-iterate Buy with a revised target price of Rs 600 (from Rs 500 earlier): Higher operating profits and increasing Ebidta multiple for Indian business (given strong profitability) to 6.5x from 6x earlier leads to higher target valuations. (NMS)