Result Update

Institutional Research
India I Metals & Mining
06 May, 2021

Tata Steel BUY

Price: Rs1,101
Best play on higher steel prices; deleveraging on Target Price: Rs1,412
Forecast return: 28%

Tata Steel (TATA) reported lower-than-expected adj consol EBITDA of Rs139.3bn Market Data
(CentrumE: Rs152.2bn), though up 66% qoq. The underperformance was due to lower Bloomberg: TATA IN
profits at European operation which inturn was due to higher carbon cost provisioning. 52 week H/L: 1,129/262
Domestically, higher steel prices led EBITDA/t to increase by ~Rs7,700/t qoq to Market cap: Rs1319.7bn
Rs27,773. TATA reduced net debt by ~Rs123bn qoq to Rs825.4bn. We remain positive Shares Outstanding: 1196.8mn
on steel cycle but expects steel prices to taper off from current levels. Despite that, we Free float: 65.6%
upgrade each our FY22E and FY23E EBITDA by 35% to factor in higher steel prices (FY23 Avg. daily vol. 3mth: 24,832,740
average realization lower by ~Rs16,000/t from Q1FY22E average). We rollover our Source: Bloomberg
valuation to FY23E. We upgrade our target price to Rs1,412, valuing India business at
Changes in the report
6.5x FY23E EV/EBITDA and Europe & others at 4.0x FY23E EV/EBITDA. Reiterate BUY.
Rating: No change
India: Higher steel prices inflates EBITDA; Q1FY22 to be much higher qoq Target price: Increase by 23%
Tata Steel Standalone (TSI) reported EBITDA of Rs91.9bn, up 37% qoq (CentrumE: Increase by 35% in
EBITDA:
Rs87.3bn and EBITDA/t of Rs26,527) and EBITDA/t of Rs27,773, up 38% qoq on account FY22E/FY23E
Source: Centrum Broking
of higher steel prices. Derived steel realisation at Rs62,928 /t, was up Rs10,000 /t
qoq. Sales volume at 3.3mt, was down 0.9% qoq. Overall CoP was up 8% qoq to Shareholding pattern
Rs36,318/t, primarily due to higher other expenses which inturn is due to higher freight Mar-21 Dec-20 Sep-20 Jun-20
and royalty on iron ore. Management guides Rs6,000-7,000/t increase in realisation and Promoter 34.4 34.4 34.4 34.4
CoP increase of Rs2,000-2,500/t qoq in Q1FY22 FIIs 18.6 16.9 11.5 11.8
DIIs 25.1 25.7 29.8 29.8
Europe: Lag effect of steel spreads and additional carbon cost suppressed EBITDA
Public/other 21.9 23.0 24.4 24.0
Higher spreads due to higher steel prices led it to record EBITDA of US$162mn and
Source: BSE
EBITDA/t of US$65 (CentrumE: US$120/t; Q3FY21 -US$46/t). The earnings could have
been much better but was restricted due to order book and contract lags which led net Centrum estimates vs Actual results
realisation to increase by US$44/t qoq only to US$947/t. Additionally, it made provision YE Mar Actual Centrum Variance
(Rs mn) Q4FY21 Q4FY21 (%)
of carbon credits of ~GBP69mn (~GBP47mn -US$26/t was one off as it monetised in
Revenue 4,99,774 4,78,289 4.5
earlier quarters) in Q4FY21. Management guides ~US$75/t qoq increase in spreads in
EBITDA 1,41,841 1,52,160 -6.8
Q1FY22 and further higher spreads in Q2FY21.
EBITDA margin 28.4 32.0
Net Debt down to Rs825bn; KPO-phase 2 capex re-starts Other Income 2,722 2,261 20.4
Consol net debt was down by ~Rs122.8bn qoq to Rs825.4bn at Q4FY21-end. With Interest 18,663 17,747 5.2
comfortable balance sheet (net debt/EBITDA of 2.7x) and cashflow visibility, it has re- Depreciation 23,924 22,974 4.1
started and expedited its expansion of Kalinganagar phase-2 (5mtpa) with total PBT 1,01,976 1,13,699 -10.3
estimated capex of ~Rs235bn, to be completed in 2HFY24E. Tax 21,950 17,881 22.8
Steel cycle improves; reiterate BUY with upside of 28% Rep. PAT 66,442 96,702 -31.3
We increase our FY22E and FY23E EBITDA by 35% each to factor in higher steel prices in Adj. PAT 76,353 96,702 -21.0
Source: Bloomberg, Centrum Broking
India and higher spreads in Europe. Despite capex, we expect net debt reduction of
~Rs266bn in FY22E to Rs559bn (not assumed any inorganic expansion which company
can look at, primarily for long products). TATA has virtually booked entire benefits of tax
which will accrue with the merger of Tata BSL which is underway. We rollover our
valuation to FY23E earnings to factor in near normal earnings and debt reduction in
FY22E. As a result, we upgrade our target price to Rs1,412, (earlier Rs1,147), valuing India
business at 6.5x FY23E EV/EBITDA and Europe & others at 4.0x FY23E EV/EBITDA. At our
TP, it would trade at 1.57x FY23E P/B. Reiterate BUY.
Financial and valuation summary
YE Mar (Rs mn) 4QFY21A 4QFY20A YoY (%) 3QFY21A QoQ (%) FY21A FY22E FY23E
Revenues 499,774 360,094 38.8 419,023 19.3 1,533,084 1,832,459 1,670,628
EBITDA 141,841 47,992 195.6 95,682 48.2 305,043 517,438 381,904
EBITDA margin (%) 0.0 13.3 (100.0) 0.0 0.0 19.5 28.0 22.6
Adj. Net profit 86,708 21,043 312.1 44,782 93.6 85,334 294,727 180,337
Metals & Mining

Adj. EPS (Rs) 72.4 18.4 293.9 37.4 93.6 71.3 232.0 141.9
EPS growth (%) 25.8 225.6 (38.8)
PE (x) 15.4 4.7 7.8
EV/EBITDA (x) 5.6 3.6 4.6 Ashish Kejriwal
Analyst, Metals & Mining
PBV (x) 1.8 1.4 1.2
+91 22 4215 9855
RoE (%) 11.8 34.1 16.9
ashish.kejriwal@centrum.co.in
RoCE (%) 7.4 19.5 12.2
Source: Company, Centrum Broking

Please see Disclaimer for analyst certifications and all other important disclosures.
Tata Steel 06 May, 2021

Thesis Snapshot
Estimate revision Valuations
FY22E FY22E FY23E FY23E
YE Mar (Rs mn) % chg % chg We value India business at 6.5x FY23E EV/EBITDA and Europe &
New Old New Old
others at 4.0x FY23E EV/EBITDA to arrive at a TP of Rs1,412. At
Revenue 18,48,459 16,66,916 10.9 16,86,627 15,42,488 9.3
our TP, it would trade at 1.57x FY23E P/B. Reiterate BUY.
EBITDA 5,17,438 3,83,030 35.1 3,81,904 2,82,188 35.3
EBITDA margin 28.0 23.0 22.6 18.3
FY23E
Adj. PAT 2,94,727 1,79,476 64.2 1,80,337 96,941 86.0 Particulars (Rs m)
EBITDA Multiple (x)
Diluted EPS (Rs) 232 149 55.5 142 80 76.2
Source: Centrum Broking Tata Steel-India 305,432 6.5 1,985,308
Tata Steel-Europe 61,575 4.0 246,300
Tata Steel versus NIFTY 50 Others 14,897 4.0 59,588
1m 6m 1 year Total EV 2,291,196
TATA IN 27.6 158.1 296.4 Average net debt 495,410
NIFTY 50 0.3 20.1 58.8 Mkt-cap 1,795,786
Source: Bloomberg, NSE No. of shares 1,272
TP (Rs/share) 1,412
Key assumptions
Particulars FY19 FY20 FY21 FY22E FY23E P/E mean and standard deviation
Average exchange rate
70.0 70.9 74.0 74.5 75.0
(Rs/USD)
TSI-Sales volume(mt) 12.7 12.3 12.3 12.7 12.7
Tata Steel BSL- sales
4.1 4.1 4.3 4.8 5.0
volume (mt)
TSE- Sales volume (mt) 9.6 9.3 8.8 10.0 10.0
TSI-Steel realisation
52,928 46,372 50,347 57,500 52,500
(Rs/t)
TSI- EBITDA (Rs/t) 16,193 12,055 17,634 23,881 18,932
Tata Steel BSL- EBITDA
9,358 5,562 12,100 19,000 13,000
(Rs/t)
TSE-EBITDA (USD/t) 80 -10 -9 140 82
Source: Centrum Broking

EV/EBITDA mean and standard deviation

Source: Bloomberg, Centrum Broking

Peer comparison
Mkt Cap CAGR (FY21-23E) P/E (x) EV/EBITDA (x) FY22E
Company
(Rs mn) Sales EBITDA EPS FY21E FY22E FY23E FY21E FY22E FY23E RoE (%) ROCE (%) Div. Yield
Tata Steel 1,318,030 4.4 11.9 41.1 15.4 4.7 7.8 5.6 3.6 4.6 34.1 19.5 2.4
JSW Steel 1,750,800 14.4 13.0 11.8 22.5 14.5 18.0 11.7 8.6 8.9 23.7 13.1 0.3
JSPL 468,537 4.1 -6.3 -5.1 7.9 8.2 8.8 5.3 4.6 4.6 15.9 11.8 0.0
SAIL 552,045 10.8 2.5 24.8 12.2 6.7 7.8 7.5 5.8 6.2 16.7 11.7 5.9
Jindal Stainless 47,480 11.1 7.3 27.4 16.8 8.9 10.3 5.9 4.2 4.0 14.1 12.1 0.0
Source: Company, Centrum Broking

Centrum Institutional Research 2

Tata Steel 06 May, 2021

Other financial and Concall Highlights

Consol
 Net debt: Consol net debt was down by ~Rs122.8bn qoq to Rs825.4bn at Q4FY21-end,
primarily due to higher earnings and net proceeds of ~Rs32.3bn from partly paid rights
issue. We treat pre-export advance(Rs63.8bn) and hybrid perpetual securities
(Rs7.75bn) as debt. Net debt/EBITDA stood at 2.7x at FY21-end.
 We note that during FY21, net debt was reduced by ~Rs246bn but interest cost charged
in P&L, at Rs76bn, was flat yoy, indicating higher provisions. Interest cost paid (cash
outflow) during FY21 was down Rs 6.16bn to Rs68bn.
 Capex: During Q4FY21, capex spent stood at ~Rs23.5bn andRs69.8bn in FY21. With
comfortable balance sheet (net debt/EBITDA of 2.7x) and cashflow visibility, it has re-
started and expedited its expansion of Kalinganagar phase-2 (5mtpa) with total
estimated capex of ~Rs235bn, to be completed in 2HFY24E. It has already spent
~Rs80bn on it. The CRM mill and pellet plant construction is underway and is expected
to be completed in 1HFY23. Management guides FY22E capex of Rs110bn including
Rs75bn capex in India.
 Management is targeting fine balance of capital allocation between deleveraging and
capex in FY22E. Management targets conservatively to reduce net debt of >US$1bn in
FY22E (our expectation is net debt reduction of ~Rs266bn). Our calculation does not
include any inorganic acquisition. Management hinted that the company is open to
acquire any assets, particularly long steel in India.
 Tax outflow: During FY21, tax cash outflow was Rs7.04bn v/s P&L tax provision of
Rs56.5bn which includes current tax of Rs42.9bn. The company has been taking
benefits of accumulated tax losses which it will be benefitted once it merges Tata Steel
BSL with itself. Management informed that no more tax benefits is left due to this
merger. Merger is underway and shareholders’ approval has been obtained on 26th
March 2021 and awaiting orders from NCLT. The merger, once approved, will be
effective from April 2019
 Sharp reduction in working capital but not due to inventory and debtor reduction:
During FY21, TATA managed working capital effectively and reduced working capital
requirement sharply by ~Rs165bn (includes ~Rs63.8bn pre-export advance). However,
we note that this reduction was not due to lower inventory & debtor days (both
increased marginally) but by reducing other assets and creating other non-current
liabilities.

Macro
 Global steel demand is expected to expand by 5.8% in CY21 with recovering economy
and progressive COVID-19 vaccination across regions. India steel demand continues to
be buoyant; supported by economic recovery, government spending and improved
liquidity. Re-imposition of mobility restrictions amidst resurgence of COVID-19
infection, and policy support tapering may impact domestic demand recovery,
however, can sell in international markets as prices are better
 Inventory levels throughout the supply chain remain low (following significant
destocking in prior periods) and global steel industry operating at high utilisation levels.
Lead times on new order extended
 China’s cancellation of the 13% export tax rebate on HRC and rebar as of May 1, 2021
changes the medium‐term prospects of the global ex‐ China steel industry, given that
China consumes ~55% of world steel and has higher exports (net exports of ~33mt in
CY20). This reflects the change in Chinese Govt stance (reducing production, exports
and increasing semi-finished steel imports).

Centrum Institutional Research 3

Tata Steel 06 May, 2021

 Management doesnot forsee any Government intervention in imposing export

tax/capping prices as Indian prices already are lowest in the world and there is no
dearth of supply.

India
 Management guides increase of Rs6000-7000/t qoq in steel realisation in Q1FY22 and
cost increase of Rs2,000-2,500/t as some RM prices are increasing.
 Tata Steel BSL reported EBITDA of Rs25.7bn up 58% qoq primarily due to higher
realisation (up Rs8,901/t qoq). Sales volume at 1.19mt, up 4% qoq. EBITDA/t stood at
Rs21,510, up 52% qoq
 It guides additional 1mt volume in FY22E v/s FY21 from Indian operation

Europe (Tata Steel Europe-TSE) and South East Asia

 Sales volume, at 2.47mt, up 17% qoq, driven by increasing demand. Derived steel
realisation, was up by US$44/t qoq to US$947/t only due to order book and contract
lags. As a result, net sales was up 22.7% qoq to Rs172.6bn.
 Gross profit/t (Revenue- cost of raw material incl change in inventories) was down 1%
qoq to US$551/t. The company made provision of carbon cost of ~GBP69mn in Q4FY21.
Approx GBP22mn/quarter carbon cost is recurring while ~GBP47mn is one off cost as
it monetised by selling carbon credits in Q1FY21 (expectation of lower production that
time due to Covid). Adjusted for one-offs, it recorded EBITDA/t of US$91 in Q4FY21.
Reported EBITDA was Rs11.9bn (US$162mn, EBITDA/t of US$65). During Q3FY21, it
reported EBITDA loss of US$98m and EBITDA/t of –US$46. The company’s underlying
EBITDA was positive in Q3FY21 but the one-offs (wage reversal support from
Netherland government which was recognized in Q1FY21 & Q2FY21 of ~GBP95mn and
higher provisioning of carbon emission of ~GBP110mn totalling ~GBP205mn) pushed it
into losses.
 It started charging EUR12/t as carbon surcharge from customers. If company produces
~9.5mt, it requires to buy very small carbon emission certificates (CEC). In Netherland,
it will not have any free allowance of carbon after 5 years i.e. it has to buy entire CEC.
 For Q1FY22, Management guides steel spread of EUR70/t to EUR285/t in Netherland
and GBP44/t to GBP257/t in UK. If we calculate the above, steel spread is expected to
increase by ~US$76/t qoq (66% volume from Netherland and 34% from UK). Added to
that, if we adjust the one-off of carbon cost (US$26/t in Q4FY21) and assuming flat
volume, EBITDA/t should be > US$160/t for TSE in Q1FY22. Q2FY22 EBITDA/t should be
much higher than Q1FY22 due to rolling forward of new contracts at higher prices.
 Management guides that it requires steel spreads of EUR210-212/t to be EBITDA
neutral
 The management called off sale of South East Asian operation and regrouped in P&L
and Balance sheet (earlier shown as part of discontinued operation). During Q4FY21, it
recorded EBITDA of Rs2.95bn (Q3FY21: Rs1.14bn) due to higher volume (up 8.5% qoq
to 0.64mt) and improved spreads. As a result, EBITDA/t stood at US$62 v/s US$26 in
Q3FY21.
 It guides additional 1mt volume in FY22E v/s FY21 sales volume of 8.83mt and liquid
steel volume of 9.55mt.

Centrum Institutional Research 4

Tata Steel 06 May, 2021

Exhibit 1: Consolidated EBITDA break down

(Rs mn) 4QFY20 1QFY21 2QFY21 3QFY21 4QFY21 QoQ (%) YoY(%)
Tata steel India 36,614 12,907 47,180 67,371 92,058 36.6 151.4
Tata Steel BSL 7,750 1,501 11,132 16,341 25,833 58.1 233.3
Tata Steel Long Products 1,321 146 1,938 4,397 5,061 15.1 283.3
Other Indian operations 3,022 420 2,581 3,071 4,251 38.4 40.7
Tata Steel Europe 650 -6,259 -4,621 -7,243 11,938
Other Trade related operations 89 -3,051 8,445 14,091 11285 (19.9) 12,579.8
South-East Asian operations 1,442 1,144 2,952 158.0 104.7
Rest of World 151 -755 -1,330 -1,123 -1,776 58.2 (1,277.0)
Less: inter-segment eliminations 2,797 -1,056 3,151 1,531 8,698 468.1 211.0
Total EBITDA 46,920 5,966 62,174 96,518 1,42,905 48.1 204.6
Operational entity EBITDA 49,477 8,715 58,210 85,081 1,42,093 67.0 187.2
Source: Centrum Broking, Company Data

Exhibit 2: Key quarterly financials

(Rs mn) 4QFY20 1QFY21 2QFY21 3QFY21 4QFY21 QoQ (%) YoY(%)
Tata Steel India
Revenue 1,42,114 93,388 1,63,620 1,79,657 2,12,026 18.0 49.2
EBITDA 36,487 12,510 46,247 67,019 91,878 37.1 151.8
Adj PAT 15,727 -8,656 22,140 38,409 56,443 47.0 258.9

Sales volume (mt) 2.91 2.11 3.59 3.34 3.31 -0.9 13.7
Derived steel realisation/t (Rs) 47,075 43,428 44,875 52,914 62,928 18.9 33.7
Cost/t (Rs)
RM incld inventory change 11,538 12,162 14,409 13,395 12,912 -3.6 11.9
Staff Cost 4,711 6,219 3,331 4,015 4,089 1.8 -13.2
Other Expenditure 20,049 20,022 14,955 16,321 19,318 18.4 -3.6
EBITDA/t (Rs) 12,538 5,940 12,882 20,070 27,773 38.4 121.5

Tata Steel BSL

Revenue 42,737 26,970 55,194 58,811 73,211 24.5 71.3
EBITDA 7,745 1,520 11,063 16,262 25,662 57.8 231.3
Adj PAT -16 -6,582 3,281 8,991 18,970 111.0
Sales volume (mt) 0.98 0.69 1.28 1.15 1.19 3.8 21.7
Derived steel realisation/t (Rs) 41,478 36,233 40,526 47,878 56,780 18.6 36.9
Cost/t (Rs) 35,706 36,672 34,478 37,032 39,857 7.6 11.6
EBITDA/t (Rs) 7,903 2,190 8,643 14,153 21,510 52.0 172.2

Tata Steel Europe

Revenue (USD mn) 1,877 1,479 1,814 1,906 2,338 22.7 24.6
EBITDA (USD mn) 9 -82 -62 -98 162 1702.9
Sales volume (mt) 2.39 1.98 2.27 2.11 2.47 17.0 3.3
Steel realisation/t (USD) 785 747 799 903 947 4.8 20.6
Cost/t (USD) 781 789 827 950 881 -7.2 12.8
EBITDA/t (USD) 4 -42 -27 -46 65

Consolidated (Rs mn)

Revenue 3,60,094 2,42,885 3,71,540 4,19,023 4,99,774 19.3 38.8
EBITDA 47,992 5,055 61,108 95,682 1,41,841 48.2 195.6
Adj EBITDA 50,240 10,380 54,250 83,940 1,39,330 66.0 177.3
Adj PAT 23,723 -46,675 15,922 38,508 76,353 98.3 221.9
Net debt 10,70,520 10,69,640 9,87,670 9,48,260 8,25,440 -13.0 -22.9
Capex 27,980 18,520 13,834 13,940 23,497 68.6 -16.0
Source: Centrum Broking, Company Data

Centrum Institutional Research 5

Tata Steel 06 May, 2021

Exhibit 3: Consolidated Net sales increases primarily due to Exhibit 4: Standalone Net sales higher due to higher steel
higher steel prices prices
Net Sales (Rs bn) % YoY growth (RHS) Net Sales (Rs bn) % YoY growth (RHS)
560 60 240 60
480 200 40
40
400 160 20
320 20
120 0
240 0
160 80 (20)
(20) 40 (40)
80
0 (40) 0 (60)
1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

2QFY21

3QFY21

4QFY21

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

2QFY21

3QFY21

4QFY21
Source: Centrum Broking Source: Centrum Broking

Exhibit 5: Consol EBITDA rises; Europe back in profits Exhibit 6: Standalone EBITDA aided by higher prices
EBITDA (Rs bn) EBITDA margin (RHS) EBITDA (Rs bn) EBITDA margin (RHS)
160 24 108 50
90 40
120 18
72
30
80 12 54
20
36
40 6
18 10

0 0 0 0
1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

2QFY21

3QFY21

4QFY21

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

2QFY21

3QFY21

4QFY21
Source: Centrum Broking Source: Centrum Broking

Exhibit 7: Consolidated: profits up largely supported by

Exhibit 8: Standalone: Adj PAT up 37% qoq
higher indian operating profits

PAT (Rs bn) PAT margin (RHS) PAT (Rs bn) PAT margin (RHS)
100 24 60 30
80 16 48 20
60
8 36
40 10
20 0 24
0 0
(8) 12
(20)
(16) 0 (10)
(40)
(60) (24) (12) (20)
1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

2QFY21

3QFY21

4QFY21

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

3QFY20

4QFY20

1QFY21

2QFY21

3QFY21

4QFY21

Source: Centrum Broking Source: Centrum Broking

Centrum Institutional Research 6

Tata Steel 06 May, 2021

Exhibit 9: EBITDA break down

(Rs mn) FY19 FY20 FY21 FY22E FY23E
Tata Steel India 2,05,629 1,48,616 2,17,654 3,03,291 2,40,432
Tata Steel BSL 37,977 23,028 54,506 91,200 65,000
Tata Steel Europe 54,140 -6,640 -6,184 1,04,486 61,575
Others -3,913 13,272 39,067 18,460 14,897
TOTAL 2,93,833 1,78,276 3,05,043 5,17,438 3,81,904
Source: Centrum Broking, Company Data

Exhibit 10: Change in estimates

Old New Variance (%)
Rs m FY22E FY23E FY22E FY23E FY22E FY23E
Exchange rate (INR/USD) 74.5 75.0 74.5 75.0 0 0
Standalone
Sales volume(mt) 12.7 12.7 12.7 12.7 0 0
Realisation (Rs/t) 52,500 47,500 57,500 52,500 10 11
Revenue 6,82,750 6,19,250 7,46,250 6,82,750 9 10
EBITDA 2,45,299 1,80,683 3,03,291 2,40,432 24 33
EBITDA/t (Rs) 19,315 14,227 23,881 18,932 24 33
PAT 1,34,675 86,406 1,77,397 1,30,441 32 51
EPS (Rs/share) 111.9 71.8 139.6 102.7 25 43
Tata Steel BSL
Sales volume (mt) 4.8 5.0 4.8 5.0 0 0
EBITDA 64,800 55,000 91,200 65,000 41 18
EBITDA/t (Rs) 13,500 11,000 19,000 13,000 41 18
TSE
Sales volume (mt) 10.0 10.0 10.0 10.0 0 0
EBITDA 65,001 37,575 1,04,486 61,575 61 64
EBITDA/t (USD) 87 50 140 82 61 64
Consolidated
Revenue 16,66,916 15,42,488 18,48,459 16,86,627 11 9
EBITDA 3,83,030 2,82,188 5,17,438 3,81,904 35 35
PAT 1,79,476 96,941 2,94,727 1,80,337 64 86
EPS (Rs/share) 149.0 80.5 231.8 141.8 56 76
Target price (Rs) 1,147 1,412 23
Source: Centrum Broking

Centrum Institutional Research 7

Tata Steel 06 May, 2021

&L Balance sheet

YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E
Revenues 1,546,918 1,461,060 1,533,084 1,832,459 1,670,628 Equity share capital 11,449 11,449 11,976 12,705 12,705
Operating Expense 1,013,931 1,050,024 569,402 859,711 832,701 Reserves & surplus 655,051 701,564 722,662 982,353 1,127,653
Employee cost 187,589 191,522 199,088 184,290 189,584 Shareholders fund 666,501 713,013 734,638 995,058 1,140,358
Others 81,336 69,896 489,410 287,021 282,438 Minority Interest 23,645 25,866 32,697 32,697 32,697
EBITDA 293,833 178,276 305,043 517,438 381,904 Total debt 1,030,912 1,186,032 955,451 805,451 730,451
Depreciation & Amortisation 73,418 87,077 92,336 94,023 96,023 Non Current Liabilities 84,561 92,293 90,814 100,272 95,159
EBIT 220,415 91,199 212,706 423,414 285,881 Def tax liab. (net) 124,599 92,614 92,414 92,414 92,414
Interest expenses 76,601 75,807 76,067 68,438 66,438 Total liabilities 1,930,218 2,109,818 1,906,014 2,025,892 2,091,080
Other income 14,206 18,220 8,956 8,560 8,560 Gross block 1,690,019 1,868,926 1,965,269 2,015,269 2,065,269
PBT 158,020 33,612 145,595 363,536 228,002 Less: acc. Depreciation (505,509) (588,388) (680,725) (774,748) (870,771)
Taxes 67,184 (25,529) 56,539 72,082 50,939 Net block 1,184,510 1,280,538 1,284,545 1,240,521 1,194,498
Effective tax rate (%) 42.5 76.0 38.8 19.8 22.3 Capital WIP 179,565 188,621 181,287 241,287 301,287
PAT 90,836 59,141 89,056 291,454 177,063 Net fixed assets 1,430,831 1,540,475 1,547,826 1,563,803 1,577,779
Minority/Associates 13,209 5,721 (3,722) 3,273 3,273 Non Current Assets 302,179 369,545 295,054 300,663 297,631
Recurring PAT 104,044 64,861 85,334 294,727 180,337 Investments 12,904 6,848 9,874 9,874 9,874
Extraordinary items (1,210) (49,296) (10,432) 0 0 Inventories 316,561 310,687 332,764 351,431 320,394
Reported PAT 102,835 15,565 74,902 294,727 180,337 Sundry debtors 118,110 78,849 95,398 114,027 103,957
Cash & Cash Equivalents 58,662 114,866 130,011 246,221 298,860
Ratios Loans & advances 18,518 21,482 19,845 19,845 19,845
YE Mar FY19A FY20A FY21A FY22E FY23E
Other current assets 78,059 61,443 24,101 28,307 26,034
Growth (%) Trade payables 217,170 213,809 259,675 276,124 251,738
Revenue 26.9 (5.6) 4.9 19.5 (8.8) Other current liab. 175,950 163,932 241,930 284,902 264,303
EBITDA 37.1 (39.3) 71.1 69.6 (26.2) Provisions 12,487 16,637 47,253 47,253 47,253
Adj. EPS 30.6 (37.7) 25.8 225.6 (38.8)
Net current assets 184,303 192,950 53,261 151,552 205,796
Margins (%)
Total assets 1,930,218 2,109,818 1,906,014 2,025,892 2,091,080
Gross 62.6 58.4 64.8 61.2 59.1
EBITDA 18.6 12.0 19.5 28.0 22.6 Cashflow
EBIT 14.0 6.1 13.6 22.9 16.9 YE Mar (Rs mn) FY19A FY20A FY21A FY22E FY23E
Adjusted PAT 6.6 4.4 5.5 15.9 10.7 Profit Before Tax 158,071 (13,804) 138,437 363,536 228,002
Returns (%) Depreciation & Amortisation 75,793 87,077 92,336 94,023 96,023
ROE 16.6 9.4 11.8 34.1 16.9 Net Interest 67,040 75,807 76,067 68,438 66,438
ROCE 8.3 1.4 7.4 19.5 12.2 Net Change – WC 25,905 41,962 164,913 21,768 (3,685)
ROIC 7.5 1.1 6.9 19.1 12.4 Direct taxes (50,942) (21,059) (7,043) (72,082) (50,939)
Turnover (days) Net cash from operations 253,360 201,687 443,267 475,683 335,840
Gross block turnover ratio (x) 0.9 0.8 0.8 0.9 0.8 Capital expenditure (86,243) (100,123) (65,340) (110,000) (110,000)
Debtors 28 24 20 21 24 Acquisitions, net (352,825) (44,327) 0 0 0
Inventory 69 77 75 68 73 Investments (86,243) (100,123) (65,340) (110,000) (110,000)
Creditors 49 53 55 53 57 Others 140,394 (853) (27,889) 0 0
Net working capital 43 48 13 30 45 Net cash from investing (384,917) (245,426) (158,568) (220,000) (220,000)
Solvency (x) FCF (131,557) (43,739) 284,698 255,683 115,840
Net debt-equity 1.4 1.4 1.1 0.5 0.4 Issue of share capital 0 1,875 32,390 0 0
Interest coverage ratio 3.8 2.4 4.0 7.6 5.7 Increase/(decrease) in debt 79,418 86,363 (308,766) (150,000) (75,000)
Net debt/EBITDA 3.3 6.0 2.7 1.1 1.1 Dividend paid (11,862) (18,152) (11,505) (31,763) (31,763)
Per share (Rs) Interest paid (71,519) (74,193) (68,037) (68,438) (66,438)
Adjusted EPS 90.9 56.7 71.3 232.0 141.9 Others (2,763) (12,840) (14,978) 0 0
BVPS 582.1 622.8 613.4 783.2 897.6 Net cash from financing (6,727) (16,946) (370,897) (250,201) (173,201)
CEPS 155.0 132.7 148.4 324.6 230.8 Net change in Cash (138,284) (60,685) (86,198) 5,482 (57,361)
DPS 13.0 10.0 25.0 26.5 26.5 Source: Company, Centrum Broking
Dividend payout (%) 14.5 73.6 40.0 10.8 17.6
Valuation (x)
P/E 12.1 19.4 15.4 4.7 7.8
P/BV 1.9 1.8 1.8 1.4 1.2
EV/EBITDA 5.3 7.7 5.6 3.6 4.6
Dividend yield (%) 1.2 0.9 2.3 2.4 2.4
Source: Company, Centrum Broking

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Tata Steel 06 May, 2021

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Tata Steel 06 May, 2021

The opinions and projections expressed herein are entirely those of the author and are given as part of the normal research a ctivity of Centrum Broking and
are given as of this date and are subject to change without notice. Any opinion estimate or projection herein constitutes a v iew as of the date of this report
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Ratings definitions
Our ratings denote the following 12-month forecast returns:
Buy – The stock is expected to return above 15%.

Add – The stock is expected to return 5-15%.

Reduce – The stock is expected to deliver -5-+5% returns.
Sell – The stock is expected to deliver <-5% returns.
Hindustan Zinc

Source: Bloomberg

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Tata Steel 06 May, 2021

Disclosure of Interest Statement

1 Business activities of Centrum Broking Centrum Broking Limited (hereinafter referred to as “CBL”) is a registered member of NSE (Cash, F&O and Currency Derivatives
Limited (CBL) Segments), MCX-SX (Currency Derivatives Segment) and BSE (Cash segment), Depository Participant of CDSL and a SEBI registered
Portfolio Manager.
2 Details of Disciplinary History of CBL CBL has not been debarred/ suspended by SEBI or any other regulatory authority from accessing /dealing in securities market.

3 Registration status of CBL: CBL is registered with SEBI as a Research Analyst (SEBI Registration No. INH000001469)

Tata Steel

4 Whether Research analyst’s or relatives’ have any financial interest in the subject company and nature of such financial interest No

5 Whether Research analyst or relatives have actual / beneficial ownership of 1% or more in securities of the subject company at the end of the month
No
immediately preceding the date of publication of the document.
6 Whether the research analyst or his relatives has any other material conflict of interest No

7 Whether research analyst has received any compensation from the subject company in the past 12 months and nature of products / services for which
No
such compensation is received
8 Whether the Research Analyst has received any compensation or any other benefits from the subject company or third party in connection with the
No
research report
9 Whether Research Analysts has served as an officer, director or employee of the subject company No

10 Whether the Research Analyst has been engaged in market making activity of the subject company. No

11 Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past twelve months; No

Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company
12 No
in the past twelve months;
Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage
13 No
services from the subject company in the past twelve months;

Member (NSE and BSE). Member MSEI (Inactive)

Single SEBI Regn No.: INZ000205331

Depository Participant (DP)

CDSL DP ID: 120 – 12200
SEBI REGD NO.: CDSL: IN-DP-CDSL-661-2012

PORTFOLIO MANAGER

SEBI REGN NO.: INP000004383

Research Analyst
SEBI Registration No. INH000001469

Mutual Fund Distributor

AMFI REGN No. ARN- 147569

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Ashok D Kadambi
(022) 4215 9937; Email ID: compliance@centrum.co.in

Centrum Broking Ltd. (CIN :U67120MH1994PLC078125)

Corporate Office & Correspondence Address

Registered Office Address
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Bombay Mutual Building,
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Tel: (022) 4215 9000 Fax: +91 22 4215 9344

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Tata Steel 06 May, 2021

Centrum Broking Institutional Equities Team Details

Nischal Maheshwari CEO nischal.maheshwari@centrum.co.in +91-22-4215 9841
Research Analyst Sector E-mail Phone number
Anish Rankawat Auto & Auto Ancillary anish.rankawat@centrum.co.in +91-22-4215 9053
Gaurav Jani BFSI gaurav.jani@centrum.co.in +91-22-4215 9110
Milind S Raginwar Cement & Building Materials milind.raginwar@centrum.co.in +91-22-4215 9201
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Saahil Harwani Associate saahil.harwani@centrum.co.in +91-22-4215 9623

Centrum Institutional Research 12