Tata Steel Stock Tumbles 5% After Weak Q4 Earnings

Shares of Tata Steel dropped by almost 5% today, hitting ₹165.50 per share. This decline followed the company's announcement of its Q4 and FY24 financial results. After the market closed on Wednesday, Tata Steel disclosed a significant 64.59% decrease in its Q4 FY24 consolidated net profit, amounting to ₹554.56 crore. The drop in profit was primarily due to lower steel prices globally. 

Total revenue from operations decreased to ₹58,687 crore, down from ₹63,131.08 crore in the same quarter last year. This decline was mainly due to a nearly 4% reduction in its core India business, which accounted for at least 62% of the total revenue. The revenue from the Indian segment fell to ₹36,635 crore, compared to ₹38,048 crore in Q4 FY23.

Revenue from the Netherlands decreased to ₹13,908 crore, down from ₹15,444 crore a year earlier. Similarly, revenue from the UK declined to ₹6,800 crore from ₹7,457 crore in Q4 FY23. For the entire fiscal year, the company's revenue fell to ₹2,29,171 crore from ₹2,43,353 crore in FY23. Additionally, the company reported a net loss of ₹4,910 crore in FY24, contrasting with a net profit of ₹8,075 crore in FY23.

In its investor presentation, the company emphasized the decline in global steel prices during the January–March 2024 period across major regions. The presentation noted that US steel prices fell by about 25%, while prices in the EU and China dropped by 6–8%. Despite these decreases, China's steel supply continued to exceed demand, leading to increased exports. Although the price gap between the EU, US, and China became narrower, weak demand persisted as a significant issue. 

In FY2024, Tata Steel India achieved a 6% year-on-year increase in deliveries, totaling approximately 19.9 million tons. Indian deliveries now account for 68% of the company's total deliveries. The company anticipates further growth, supported by additional volumes from the 5-MTPA capacity expansion at Kalinganagar.  

The company observed that India's apparent steel demand continued to grow, bolstered by government spending and increased consumption. Sectors like automotive, infrastructure and construction, and capital goods saw improvements during the quarter. In Europe, however, the EU manufacturing PMI remained low, fluctuating between 45 and 47 from January to March 2024. According to the company's assessment, high inflation and geopolitical tensions continued to strain steel end-use sectors.

Meanwhile, the company's board has proposed a dividend of ₹3.60 per equity share with a face value of ₹1 each for FY24. Additionally, the board has approved the issuance of additional debt securities, in one or more tranches, to raise up to ₹3,000 crore through non-convertible debentures (NCDs) on a private placement basis.

Global brokerage firm Jefferies has assigned a 'Buy' rating to Tata Steel with a target price of ₹200. 

Conversely, Morgan Stanley has given Tata Steel an 'equal-weight' rating with a target price of ₹135. Morgan Stanley noted, "The better-than-expected consolidated EBITDA was driven by strong performances in both domestic and international business segments. Tata Steel's Kalinganagar Phase 2 expansion in the domestic market is progressing as planned. However, in the UK, the existing heavy assets are approaching closure."

Tata Steel Ltd. is a diversified steel producer with fully integrated operations, from mining to manufacturing and marketing of finished products. The company's main activities include raw material operations, iron-making, and the provision of shared services for maintenance support.

Tata Steel offers a wide range of products such as hot-rolled, cold-rolled, and galvanized steel, along with branded solution offerings. The company's products cater to various markets including automotive, construction, packaging, and engineering.

Its manufacturing facilities are located in India, Canada, the Netherlands, the UK, Germany, France, Belgium, Sweden, and Turkey. Tata Steel is headquartered in Mumbai, Maharashtra, India.