Tata Steel’s shares gains nearly 2% to intra-day high of Rs 156.11 on NSE after the company reported a net profit of Rs 833 crore for the quarter ending September 2024, marking a significant recovery from a loss of Rs 6,196 crore in the same period last year. Despite a slight dip in revenue, the company showcased strong improvements in profitability.
Revenue Declines Amid Positive Profitability
Revenue from operations for the quarter stood at Rs 53,905 crore, reflecting a 3% year-on-year decline from Rs 55,681 crore in the previous year.
However, Tata Steel posted a solid EBITDA of Rs 6,141 crore during the July-September 2024 period, with margins expanding to 11.4%, indicating robust operational efficiency despite revenue challenges.
Cost Management and Expense Reduction
Total expenses in the second quarter reduced to Rs 52,332 crore, down from Rs 55,853 crore in the same quarter of the previous year.
This decrease in expenses helped Tata Steel to mitigate the impact of lower revenues and improve its profitability.
Tata Steel India Reports Revenue Dip
The company’s India business saw a 5% year-on-year revenue decline, with earnings falling to Rs 32,399 crore in the September 2024 quarter compared to Rs 34,197 crore in the same period last year. This decline was partially offset by the performance of its international ventures.
NINL Business Sees Growth
Revenue from Tata Steel’s Neelachal Ispat Nigam Ltd (NINL) business rose to Rs 1,348 crore in Q2 FY24, a slight increase from Rs 1,283 crore in the corresponding quarter of the previous year, contributing positively to the overall performance.
Board Appointment of Pramod Agrawal
In addition to the financial results, the company’s Board has approved the appointment of Pramod Agrawal as an Additional Director (Non-Executive, Independent) effective November 6, 2024. Agrawal will also serve as an Independent Director for a term of five years, further strengthening the leadership team.
Brokerages on Tata Steel
JP Morgan on Tata Steel
JP Morgan maintained an “overweight” rating on Tata Steel with a target price of Rs 180. The brokerage highlighted that the company’s Q2 earnings beat expectations, driven by lower-than-expected employee costs and other expenses, which contributed to a stronger-than-anticipated EBITDA.
JP Morgan noted that there were no negatives in the earnings print, with management’s focus on debt reduction being a key point to watch moving forward. The firm expects the stock to perform positively, given the headline earnings beat against consensus estimates.
Morgan Stanley on Tata Steel
Morgan Stanley maintained an “Equal Weight” rating on Tata Steel with a target price of Rs 175. The brokerage noted a strong beat in operating expenses (Opex), which contributed to better-than-expected performance in both the domestic and international businesses.
Tata Steel’s consolidated EBITDA stood at Rs 6,140 crore, 38% ahead of Morgan Stanley’s estimates and 24% above Bloomberg consensus. While the UK/Netherlands business showed some weakness, other regions performed better.
Looking ahead, Morgan Stanley highlighted that management’s guidance on demand and spreads trajectory for both domestic and international businesses in the second half of the year will be key to watch.
Stock Performance in Last One Year
Tata Steel shares have shown mixed performance across different time frames. Over the past month, the stock has declined by 6.53%, and it has seen a similar trend over the last six months, with a negative return of 6.47%.
However, year-to-date, the stock has posted a notable gain of 10.04%, reflecting a positive trajectory for the current calendar year. Looking at the longer-term picture, Tata Steel has demonstrated significant growth, with its share price rising by over 29% in the past twelve months.
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