Tata Steel Q3 Preview: PAT may soar 5x YoY as volumes lift earnings

Tata Steel is expected to post a strong set of numbers for the December quarter, with stronger volumes cushioning the impact of weaker steel prices and higher input costs. An average of five brokerages pegs revenue growth at around 8% year on year, while profit after tax is seen jumping nearly five-fold from a low base last year, helped by better operating leverage and a gradual improvement in overseas performance.

Brokerages broadly agree that India operations will remain the key earnings driver in the quarter. Kotak Equities estimates standalone steel realisations to decline about 3% quarter on quarter due to price weakness for most of the quarter, with price hikes coming in only towards the end.

Despite this, standalone volumes are expected to rise sharply, up more than 14% year on year and about 9% sequentially, supported by healthy domestic demand and improved utilisation. India EBITDA per tonne is, however, seen moderating sequentially to around Rs 13,000 due to lower realisations and higher coking coal costs, even as it remains meaningfully higher on a YoY basis.


YES Securities expects Tata Steel to report EBITDA of about Rs 8,170 crore, translating into a margin of roughly 14%, down from 15.2% in the previous quarter. The brokerage flags weaker steel prices and higher coal costs as the main drags, leading to an estimated 8% sequential decline in EBITDA, although YoY growth is seen at nearly 39%. Sales volumes for the quarter are estimated at around 8.3 million tonnes.

Motilal Oswal also expects better volumes to partially offset the impact of muted net steel realisations in India, resulting in some pressure on quarter-on-quarter margins. The brokerage notes that Europe operations are likely to see a moderation in earnings due to seasonal weakness, though losses are expected to narrow compared with earlier periods.

On the Europe front, Kotak Equities estimates a consolidated EBITDA loss of about $12 per tonne, an improvement from the previous quarter. Losses at the Netherlands operations are seen narrowing, while the UK business is expected to remain under pressure with relatively higher losses. Management commentary on the Carbon Border Adjustment Mechanism, import quota cuts and the pace of recovery in Europe will be closely tracked.

Overall, investors will focus on management guidance around steel prices, cost trends, volume outlook and capex plans, especially as global steel markets remain volatile.

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