Tata Steel slipped over 2 percent intraday on August 8, a day after it reported a steep 64.3 percent year-on-year (YoY) decline in June quarter profit at Rs 693 crore amid muted revenue growth and subdued operating income.
The profit in the corresponding quarter last year was Rs 1,940.8 crore. Lower other income (down 29 percent YoY) also impacted the bottom line.
Revenue during the quarter grew 1.27 percent YoY to Rs 35,947.1 crore, dented by lower domestic and Europe growth.
It was supported by Tata Steel BSL (erstwhile Bhushan Steel acquired under NCLT) which grew 105.5 percent YoY to Rs 4,332.73 crore in Q1FY20.
Reacting to the news, CLSA maintained its sell rating on Tata Steel but slashed its target price to Rs 320 from Rs 395 earlier.
Fall in margin took a toll on the financial performance of Tata Steel. The standalone margin held up on a QoQ basis but should fall in the September quarter, said the note.
Global steel prices are under pressure, and hopes for any big rally are fading at this point in time. CLSA slashed FY20 earnings by 22 percent. The FY20-21 EPS is still 31-40 percent below street estimates.
Steel prices in India declined as subdued economic activity, seasonal slowdown and liquidity issues weighed on domestic consumption. Higher net imports further exacerbated the demand-supply balance, the company said.
At the operating level, earnings before interest, tax, depreciation and amortisation dropped 15.4 percent YoY to Rs 5,376.9 crore and margin contracted 294bps to 14.96 percent in the quarter ended June 2019, partly dented by higher finance and depreciation costs in Q1.
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