Tata Steel recovers early losses as Q1 earnings beat Street’s estimate

Despite fall in Tata Steel’s Q1 numbers, the company’s topline as well as bottomline still came above the Street’s expectations, preventing a slump in the stock price.

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Shares of Tata Steel recouped their early losses on July 25 as the company’s better-than-expected earnings for the April-June quarter supported sentiment.

The stock opened one percent lower but soon recouped its losses to and moved higher. Consequently, at 09.31 am, shares of Tata Steel were trading around 1 percent higher at Rs 116.55 on the NSE. The stock had hit an intraday low of Rs 114.35 earlier in the session.

The steel manufacturer’s consolidated net profit of Tata Steel plummeted 93 percent year-on-year to Rs 525 crore in Q1. This downturn was primarily attributed to the performance of its Europe operations.

Comparatively, the company’s net profit in the same quarter a year ago was much higher at Rs 7,714 crore, and in the previous quarter (January-March 2023), it stood at Rs 1,566 crore.

The profit for the current quarter was further affected by a non-cash deferred tax charge resulting from the buy-in transaction at the British Steel Pension Scheme. However, the completion of the insurance buy-in of the British Steel Pension Scheme was successful, effectively reducing risks for Tata Steel UK, as stated by the company.

Moreover, the company’s revenue for the quarter also declined over 6 percent on year to Rs 59,490 crore, down from Rs 63,430 crore recorded in the year-ago period. The company attributed the fall in revenues to lower volumes, partly offset by higher realisations across geographies.

Despite the sharp fall in numbers, Tata Steel’s topline as well as bottomline still came above the Street’s expectations of Rs 56,337.80 crore and Rs 122.80 crore, respectively. In that way, the better-than-expected earnings prevented a sharp slump in the steel manufacturer’s stock price.

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In the first quarter, the steelmaker’s earnings before interest, taxes, depreciation, and amortization (EBITDA) amounted to Rs 6,122 crore. This represents a significant decrease from the EBITDA of Rs 15,047 crore reported in the same quarter of the previous year.

However, the company clarified that its adjusted EBITDA stood at Rs 6,238 crore after accounting for changes related to foreign exchange movements on intercompany debt, receivables, and the British Steel Pension Scheme (BSPS).

Brokerage firm Morgan Stanley also stated that the company’s EBITDA came ahead of the firm’s estimate led by better realisations but were still partially offset by higher operational expenditures. The firm has an ‘equalweight’ call for the stock with a price target of Rs 110.

Also Read: Tata Steel Q1 Results: Net profit plummets 93% YoY as Europe weighs down earnings

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