7 May 2021
4QFY21 Results Update | Sector: Metals
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
1319.6 / 17.9
1129 / 263
TP: INR1,205 (+9%)
Deleveraging to be strong despite capex
Near-term margin outlook is positive
Financials & Valuations (INR b)
2021 2022E 2023E
EBITDA Margin (%)
Cons. Adj. EPS (INR)
EPS Gr. (%)
Div. Yield (%)
FCF Yield (%)
Tata Steel (TATA) has been a key beneficiary of rising steel prices. As
expected, it reported a strong 4QFY21, with consolidated EBITDA rising
205% YoY to INR142b (its highest ever) on the back of higher prices. Net
debt fell INR123b QoQ to INR826b (lowest since Mar’18).
We expect steel prices and margin to stay strong on tightening demand-
supply in Asia and raise our FY22E/FY23E EBITDA estimate by 77%/36%
and our TP by 35% to INR1,205/share. Net debt is expected to decline by a
further INR188b in FY22E to INR638b, despite the resumption of capex for
the 5mtpa expansion of the Kalinganagar plant.
TATA is trading at a FY22E EV/capacity of USD899/t, which is at a 30%
premium to its five-year average. This is already discounting the expected
deleveraging from the current upcycle. We therefore remain
Best ever quarterly EBITDA
TATA’s consolidated revenue/EBITDA/adjusted PAT rose 26%/50%/99% QoQ
(est. +1%/-3%/0%) to INR499b/INR142b/INR76b.
EBITDA rose 37% QoQ to INR91.9b (est. INR86.8b) on the
back of a 19% improvement in realization to INR64,153/t (up 5% v/s our
estimate). Volumes were down 1% QoQ to 3.3mt (in line). EBITDA/t stood
at INR27,800/t, up 39% QoQ (up 6% v/s our estimate). Adjusted PAT stood
at INR56b, up 99% QoQ (up 6% v/s our estimate).
Tata Steel Europe (TSE)
posted an EBITDA of INR11.9b (est. INR31.3b) as
against a loss of INR7.2b in 3QFY21. EBITDA/t stood at USD66/t (est.
USD170/t). The miss on EBITDA was due to higher carbon credit provision
of GBP69m (USD39/t) and a miss on realization as only one-fourth of the
QoQ increase in EU steel prices was realized by TSE. This was due to
contracts fixed earlier at lower prices.
Tata Steel BSL
had earlier reported an EBITDA of INR25.7b (est. INR20.5b),
up 58% QoQ, on the back of higher realization (+20% QoQ) at
INR61,367/t. EBITDA stood at INR21,510/t, up 52% QoQ.
Consolidated net debt fell by INR123b QoQ to INR826b, led by strong FCF
generation (INR88b) and receipt of final call on partly paid-up shares
(INR32b). Net debt reduction was INR245b in FY21.
Consolidated revenue/EBITDA/adjusted PAT rose 12%/75%/7x YoY to
INR1,563b/INR305b/INR82.6b in FY21.
OCF/FCF stood at INR379b/INR310b in FY21, up 88%/216% YoY due to
higher EBITDA, working capital release of INR101b (adjusted for export
advance), and a lower capex of INR70b (v/s INR104b in FY20).
Shareholding pattern (%)
Mar-21 Dec-20 Mar-20
FII Includes depository receipts
Amit Murarka - Research analyst
Basant Joshi - Research analyst
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.