Analysts anticipate Tata Steel Ltd. will report a single-digit decline in net profit for the June quarter (Q1 FY27), even as consolidated sales are expected to show robust double-digit growth. The consensus among institutional equities firms points to a challenging European market impacting overall profitability.
Q1 Profitability Forecasts
Ambit Institutional Equities projects Tata Steel's net profit to fall by 6% year-on-year to Rs 1,974 crore, despite a 15% rise in sales to Rs 61,408 crore. Similarly, Kotak Institutional Equities forecasts a 2.5% drop in Q1 net profit to Rs 2,026 crore, or a 7.3% decline on an adjusted basis.
Antique Stock Broking also aligns with this outlook, predicting a 7.3% year-on-year fall in consolidated net profit to Rs 2,048 crore. However, they expect consolidated sales to climb by 10.9% to Rs 58,986 crore.
European Operations Under Scrutiny
The performance of Tata Steel Europe is expected to be a significant factor in the quarter's results. Analysts note that the part shutdown of a rolling mill in the Netherlands will negatively impact the company's European segment. Kotak Institutional Equities anticipates Europe to report an EBITDA loss of $15 per ton, with a notable decline in Dutch EBITDA.
Conversely, the UK business is projected to show improved profitability, driven by higher realizations. Despite these challenges, consolidated EBITDA is expected to improve, with Ambit forecasting a 24% rise to Rs 9,210 crore and Antique predicting a 23.6% increase to Rs 9,180 crore, aided by higher realizations partially offset by increased coking coal costs.
Indian Business and Sales Volume Growth
The Indian operations are poised for growth, with Ambit Institutional Equities expecting Indian business EBITDA per ton to expand by Rs 2,500, supported by higher realizations. Antique Stock Broking projects Tata Steel's standalone volume in India to be 8% higher year-on-year, primarily due to the ramp-up at its Kalinganagar facility.
Axis Securities models higher consolidated sales volume on a year-on-year basis, noting a 9% increase in steel HRC prices. They anticipate consolidated revenue growth led by higher steel sales volumes and HRC prices, with India's EBITDA improving due to increased steel production and net sales realizations (NSRs).
"UK business is expected to improve profitability given higher realisation. While TSN should be negatively impacted by DSP production disruption. Indian business EBITDA/t to expand by Rs 2,500/t, led by higher realisations & higher coking coal costs," Ambit Institutional Equities stated.
Despite the positive outlook for India, quarter-on-quarter EBITDA for the consolidated entity is likely to decline, influenced by higher coking coal prices in India and at Tata Steel Netherlands (TSN), alongside lower volumes at TSN.