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Standalone: Adj EBITDA up 20% QoQ 

Tata Steel Standalone’s adj EBITDA at Rs82.46bn, was up 20% QoQ and adj EBITDA/t at Rs16,905, up Rs2,657/t (19%) QoQ driven by higher realisation by Rs1100/t and lower purchasing cost of semi steel products. During the quarter, royalty cost on chrome ore has increased by Rs8000-9000/t as well as higher closing inventory builtup led to increase in WC requirement. Coking coal cost increased marginally by USD4/t aided by blending of lower grade coal. The sales volume stood flattish sequentially at 4.88mt. Management guided average steel realisation to be lower by Rs1000/t QoQ and coking coal cost to increase by USD10 QoQ respectively in Q4FY24.

Netherland: Continue to report operational losses; UK plant closure progressing

The Netherland business reported EBITDA loss of USD147mn up by 6% QoQ and EBITDA loss/t of USD113/t. It is due to fall in realisation/t by USD71/t 5.6% QoQ to USD1203/t offset by fall in raw material cost fall by 24% QoQ to USD648mn QoQ on account of lower consumption of coking coal and iron ore during the quarter. While UK reported EBITDA loss of USD201mn (vs USD165mn in Q2FY24) and EBITDA loss/t of USD313/t (vs loss of USD227/t in Q2FY24. Further, coking coal cost is likely to fall by USD10-20/t QoQ and higher volume in Netherland unit likely in Q3FY24.

Maintain ADD with TP of Rs128

Tata steel Europe continue to report losses due to weak demand, higher cost and operating leverage loss due to relining of Netherland plant. Netherland plant is likely to start production from Dec-23, and likely to turnaround in FY25. Further, transition of UK business will remove overhang and turnaround into sustainable business. While, India has added 5mtpa of flat steel capacity at Kalinganagar and another 0.75mtpa EAF capacity in FY26 driving volume growth and profitability. We recommend ADD rating with target price of Rs128

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