Tata Steel reported better than expected EBITDA for Q4FY21 as its consolidated EBITDA jumped almost 2x YoY to Rs 143 billion. The sharp increase in EBITDA was led by India operations where adjusted EBITDA/t increased to Rs 27,828 (+38% QoQ, +221% YoY) on sharp increase in steel realizations.

Tata Steel Europe EBITDA/t improved to Rs 4,821 (vs. loss of Rs 3,438 in Q3FY21) although it was slightly weaker than our estimate. Tata Steel’s net debt fell by Rs 107 billion to Rs 750 billion. In FY22, it aims to lower its debt further by USD 1 billion even as it ramps up capex to expand its Kalinganagar plant by 5 mtpa.

Commenting on the result review, IDBI Capital said, "We raise our FY22 EBITDA estimate by 51% given strong beat in Q4FY21 and increase in steel prices in the past three months (we expect higher steel prices to sustain). Even our FY23 EBITDA estimates are higher by 17% as we model higher steel realizations. We raise our SOTP-based target price to Rs 1,329 (earlier Rs 826) as we raise our FY23 profitability estimates and cut our debt forecasts."

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