RESULTUPDATE

TATASTEEL
Stillundertheweather
IndiaEquityResearch|MetalsandMining

TataSteels(Tata)Q1FY16consolidatedEBITDAofINR27.7bn(down35%
YoY, but up 80% QoQ) was way ahead of our INR15.6bn estimate,
primarilydueto(1)othersubsidiariesEBITDAturningpositiveversusloss
reported in each of the past 3 years; and (2) low raw material cost in
standalone business. Standalone EBITDA/t at INR7.9k dipped 49% YoY
trackingweakrealisations(down15%YoY),mutedvolumegrowth(up2%
YoY)andpartialimpactofhighcostimportedironore.WhileEBITDA/tof
TataSteelEurope(TSE)atUSD26fell41%QoQ,SEAoperationsreported
positive EBITDA/t of USD8 versus USD49 loss in Q4FY15. Even as
sustainability of other subsidiaries positive performance needs to be
monitored, EBITDA/t in India is estimated to be under pressure given
continued weakness in domestic steel prices. Factoring weak prices, we
lower our FY16E/FY17E EBITDA 11%/12%. Accordingly, our TP is revised
downtoINR238(INR332currently).Factoringweaksectorfundamentals,
wemaintainHOLD.

EDELWEISS4DRATINGS
AbsoluteRating

HOLD

RatingRelativetoSector

Performer

RiskRatingRelativetoSector

Medium

SectorRelativetoMarket

Underweight

MARKETDATA(R:TISC.BO,B:TATAIN)
CMP

:INR234

TargetPrice

:INR238

52weekrange(INR)

:554/232

Shareinissue(mn)

:971.2

Mcap(INRbn/USDmn)

:227/4,350

Avg.DailyVol.BSE/NSE(000) :5,481.4
SHAREHOLDINGPATTERN(%)
Current

Q4FY15 Q3FY15

Coreoperationssubdued;noncoreshines

Promoters*

31.4

31.4

31.4

Indiaoperations:Salesvolumeat2.1mtgrewamere2%YoYtrackingmuteddemand
and rising imports. Blended realisations dipped 15% YoY and 4% QoQ owing to weak
globalpricesandareestimatedtostayweak.Ergo,EBITDA/tatINR7.9kfell49%YoY.
International operations: While volumes in SEA disappointed dropping 36% YoY,
EBITDA/tstoodpositiveatUSD8(versusUSD49lossinQ4FY15)duetobenefitsoflow
scrapprices.ThoughTSEsvolumesgrew7%YoY,EBITDA/tdippedtoUSD26(USD44in
Q4FY15) led by imports pressure and currency impact. Other subsidiaries surprised
posting a positive EBITDA of INR4.8bn against loss in each of the past 3 years.
Sustainabilityofthesameneedstobemonitored.

MF's,FI's&BKs

28.1

28.1

26.6

FII's

13.3

13.3

16.2

Others

27.3

27.3

25.9

Outlookandvaluations:Sectorpangs;maintainHOLD
Weestimateglobalsteelpricestostayunderpressureduetonodemandpull(tracking
slowdowninChina),absenceofcostpush(globalironoreglut)andrisingexportsfrom
China. Accordingly, domestic steel prices too are expected to stay under pressure.
Currentdomesticsteelpricesare~8%lowerthanQ1FY16;factoringwhich,werevise
downFY16E/FY17EEBITDA11%/12%.WemaintainHOLD/SPwithrevisedtargetprice
ofINR238.

*Promoterspledgedshares
(%ofshareinissue)

NIL

PRICEPERFORMANCE(%)
Stock

Nifty

EWMetals
andMining
Index

1month

(4.8)

4.3

3months

(6.9)

(1.2)

(1.7)
(3.2)

12months

(44.1)

10.0

(31.9)

Financials(Consolidated)
YeartoMarch
Q1FY16
Netrevenue
303

Q1FY15

%change

Q4FY15

364

(16.8)

28

43

(35.1)

67.2

6.9

4.1

67.2

EBITDA
AdjustedProfit

EPS(INR/share)

(INRbn)

%change

FY15E

FY16E

FY17E

337

(10.0) 1,395

1,297

1,418

15

125

134

163

79.8

NavinSahadeo
+912266233473
navin.sahadeo@edelweissfin.com

(10)

NA

85

16

22

(10.0)

NA

87.1

16.5

23.0

SalvinShah

2.7

14.1

10.1

7.7

7.4

6.2

+912266233392
salvin.shah@edelweissfin.com

22.4

4.8

6.5

P/E(x)
EV/EBITDA(x)
ROE(%)
EdelweissResearchisalsoavailableonwww.edelresearch.com,
BloombergEDEL<GO>,ThomsonFirstCall,ReutersandFactset.

August13,2015
EdelweissSecuritiesLimited

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MetalsandMining

Conferencecall:Keyhighlights
India

SteeldemandremainedsubduedduringQ1FY15,thoughsomebrightspotswerevisible
insalestotheautosegment.

Inaddition,fallingglobalcommoditypricesandhighChineseimportscontinuetohaunt
Indiansteelindustry.

As a result of elevated imports, steel prices in India corrected 7% (INR2.3k/t) QoQ.

However, Tatas realisations fell 4% compared to 7% decline in steel prices due to
superior product mix, branded, retail, valueadded products and strong marketing
franchise.Onethirdoftotalsalesarenowvalueaddedproducts.Tatahas44%market
share in the auto segment where the company directly competes with imports from
JapanandKorea.

Raw material cost declined ~27% QoQ as consumption of imported iron ore reduced.
Tataconsumedonly0.3mtofimportedironoreinQ1FY16(2.5mtinQ3FY15and1mtin
Q4FY15).Currently,thecompanyholds1.07mtofinventory.

InQ2FY16,despatchesstoppedfromNoamundiironoremineinJharkhand.Asaresult,
the company will have to resort to boughout iron ore for 2530% of its requirement
leadingtohighercostofrawmaterials.

Ferroalloydivisionhasnowgotapprovaltosellchromiteoreinthemerchantmarket.
Hence,profitabilityofferroalloydivisionisexpectedtoreverttooriginallevel.

Europe

Steel demand is expected to grow 1.5% in 2015 as market conditions improve.

However,highimportscontinuetohauntthesteelindustry.

TSE recorded EBITDA/t of USD26 versus Q4FY15 EBITDA/t of USD44. Margins will
remainunderpressureledbyelevatedimports,thoughinputcostshavesoftened.

SouthEastAsia

Regional economies in SEA continue to be affected by exports from China and

depressedrebarscrapspread.Strategyistofocusonexportsmarketsandcostsavings.

In SEA, deliveries remained affected due low demand on account of delay in

announcement of infrastructure projects by government. Sales volumes in SEA
operationsdeclined10%QoQ.

However, margins improved on account of lower conversion cost and better

management of spreads. Accordingly, SEA operations reported positive EBITDA/t of
USD8versuslossofUSD49inQ4FY15.

Capexupdate:OrissaexpansiontocommenceoperationsinH2FY16

Kalinganagar steel plants (3mtpa) progress is satisfactory and is likely to commence

operationsbyH2FY16.Tatahasalreadyspent~INR215bnsofaronthisproject.
The company spent INR32.5bn in Q1FY16 on its expansion projects and is expected
spendINR100bninFY16.Postcompletionof expansionatKalinganagar,thecompany
willonlyincurmaintenancecapexof~INR5055bn.

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TataSteel

Otherhighlights

Subsidiaries other than TSE and SEA posted EBITDA profit of INR4.8bn versus our
estimateofalossofINR4.5bn.

ShipmentsfromDirectShippingOre,Canada,recommencedinJune2015andshipped
170kt in Q1FY16. Tata is targeting to ship 4.2mt in FY16 and 6mt over the next 23
years.

Otherincomeincludes~INR7bnprofitfromsaleofinvestments.

Table1:Operationalperformancesummary
p
p
y
TataSteelIndia
Volume(mt)
Revenue(USDmn)*
Revenue/tonne(USD)
EBITDA(USDmn)*
EBITDA/tonne(USD)

Q1FY15
2.1
1,751
834
546
260

Q2FY15
2.1
1,780
844
528
250

Q3FY15
2.1
1,596
749
319
150

Q4FY15
2.4
1,708
709
267
111

Q1FY16
2.1
1,432
669
380
177

TataSteelEurope
Volume(mt)
Revenue(USDmn)*
Revenue/tonne(USD)
EBITDA(USDmn)*
EBITDA/tonne(USD)

Q1FY15
3.2
3,470
1,084
166
52

Q2FY15
3.4
3,335
992
153
46

Q3FY15
3.3
3,128
945
211
64

Q4FY15
3.8
3,138
824
169
44

Q1FY16
3.4
2,812
817
91
26

SouthEastAsia
Volume(mt)
Revenue(USDmn)*
Revenue/tonne(USD)
EBITDA(USDmn)*
EBITDA/tonne(USD)

Q1FY15
1.1
677
627
5
5

Q2FY15
1.0
612
645
(46)
(49)

Q3FY15
0.8
457
571
(3)
(4)

Q4FY15
0.8
395
520
(37)
(49)

Q1FY16
0.7
356
516
5
8

Others
Volume(mt)
Revenue(USDmn)*
EBITDA(USDmn)*

Q1FY15
0.1
20
1

Q2FY15
0.1
178
(16)

Q3FY15
0.1
243
(29)

Q4FY15
0.1
166
(145)

Q1FY16
0.1
172
75

Overall
Volume(mt)
Revenue(USDmn)*
Revenue/tonne(USD)
EBITDA(USDmn)*
EBITDA/tonne(USD)

Q1FY15
6.5
5,917
916
718
111

Q2FY15
6.5
5,905
909
619
95

Q3FY15
6.3
5,424
860
498
79

Q4FY15
Q1FY16
7.1
6.3
5,408
4,772
766
755
254
551
36
87
Source:Company,Edelweissresearch
*includesotherincome

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MetalsandMining

Changeinestimates
FY16E
FY17E
YoY
New
Old %change
New
Old %change
Revenue
1,296,692 1,384,887
(6.4) 1,418,107 1,514,830
(6.4)
EBITDA
133,828
149,818
(10.7) 163,314
185,203
(11.8)
EBITDAmargins(%)
10.3
10.8
11.5
12.2
AdjustedPAT
16,065
22,509
(28.6)
22,367
29,489
(24.1)
AdjustedPATmargins(%)
1.2
1.6
1.6
1.9

Table2:TargetpricerevisedtoINR238(INR332earlier)

TataSteelEurope(TSE)EBITDA(INRmn)
Less:cashpensionpaymentnotinP&L(INRmn)
EffectiveTSEEBITDA(INRmn)
EV/EBITDAmultiple(x)
TSEEV
SEA/othersEBITDA(INRmn)
EV/EBITDAmultiple(x)
SEAEV(INRmn)
TotalEVofinternationaloperations(INRmn)
Less:netdebtofinternationalbusiness(TSE)
Less:pensiondeficit(INRmn)
Equityvaluationofinternationalbusiness(INRmn)
Equityvaluationofinternationalbusinesspershare(INR)
TataSteelIndiaEBITDA(INRmn)
EV/EBITDAmultiple(x)
TataSteelIndiaEV(INRmn)
Less:NetdebtpreviousFY(INRmn)
EquityvaluationofIndiabusiness(INRmn)
EquityvaluationofIndiabusinesspershare(INR)
Add:Valueofsubsidiaryinvestments(discounted)(INR)
Noofshares(x)
Targetprice(INR)
Currentmarketprice(INR)
Upside(%)

Comments
EBITDArevisionledby
weaksteelprices

FY17E
43,110
9,128
33,981
5.0
169,906
5,854
5.0
29,268
199,174
442,215
37,715
(280,755)
(289)
114,351
6.5
743,280
300,663
442,617
456
71
971
238
234
2
Source:Edelweissresearch

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TataSteel

Financialssnapshot(standalone)
YeartoMarch
Totalnetrevenues
Dec/(inc)instock
Purchaseofsemis
Rawmaterial
Staffcosts
Purchaseofpower
Freight&Handling
Otherexpenses
Totalexpenditure
EBITDA
Interest
Depreciation
Otherincome
PBT
Tax
Adjustednetprofit
Extraordinaryitems
Reportednetprofit
Equitycapital(FVINR10)
Outstandingshares(mn)
BasicEPS(INR)

Q116
90,937
(1,690)
2,364
23,005
10,823
6,943
6,954
25,652
74,050
16,887
3,960
4,682
7,488
15,733
4,306
11,427
1,059
12,486
9,714
971
12.9

Q115 %change
Q415 %change
104,683
(13.1) 106,349
(14.5)
(3,435)
NA
5,645
NA
679
NA
2,124
11.3
25,640
(10.3) 27,131
(15.2)
11,303
(4.2) 11,681
(7.3)
7,213
(3.7)
6,348
9.4
6,909
0.6
7,713
(9.8)
23,815
7.7
28,919
(11.3)
72,124
2.7
89,560
(17.3)
32,559
(48.1) 16,789
0.6
4,923
(19.6)
5,324
(25.6)
4,933
(5.1)
5,725
(18.2)
1,435
NA
686
NA
24,138
(34.8)
6,427
144.8
9,337
(53.9)
(2,154)
NA
14,800
(22.8)
8,581
33.2
7,880
(87)
(440)
NA
22,680
(44.9)
8,141
53.4
9,714
9,714
971
971
23.3
(44.9)
8.4
53.4

FY15
417,850
(7,452)
6,883
117,078
46,091
25,701
28,833
100,627
317,762
100,088
19,760
19,976
5,828
66,181
20,698
45,483
18,909
64,391
9,714
971
66.3

FY16E
398,085
0
3,948
97,542
46,479
26,993
30,975
99,779
305,716
92,370
20,747
20,575
6,209
57,256
18,894
38,362
0
38,362
9,714
971
39.5

(INRmn)
FY17E
461,085
0
4,886
114,671
47,409
31,300
35,918
112,551
346,734
114,351
21,785
21,192
6,283
77,657
25,627
52,030
0
52,030
9,714
971
53.6

as%ofnetrevenues
Rawmaterial
Purchaseofgoods
Staffcosts
Purchaseofpower
Freight&Handling
Otherexpenses
EBITDA
Adjustednetprofit
Reportednetprofit
Taxrate

23.4
2.6
11.9
7.6
7.6
28.2
18.6
12.6
13.7
27.4

Pertonneperformance
Volume(mt)
Blendedrealisation
Dec/(inc)instock
Purchaseofsemis
Rawmaterial
Staffcosts
Purchaseofpower
Freight&Handling
Otherexpenses
Cost
EBITDA

21.2
0.6
10.8
6.9
6.6
22.7
31.1
14.1
21.7
38.7

Q116
2.1
42,434
(789)
1,103
10,735
5,051
3,240
3,245
11,970
34,554
7,880

30.8
2.0
11.0
6.0
7.3
27.2
15.8
8.1
7.7
(33.5)

26.2
1.6
11.0
6.2
6.9
24.1
24.0
10.9
15.4
31.3

Q115
%change
Q415
2.1 1.9 2.4
49,778
(14.8) 44,165
(1,633)
NA 2,344
323
NA 882
12,192
(12.0) 11,267
5,375
(6.0) 4,851
3,430
(5.5) 2,636
3,285
(1.2) 3,203
11,324
5.7 12,010
34,296
0.8 37,193
15,482
(49.1) 6,972

24.5
1.0
11.7
6.8
7.8
25.1
23.2
9.6
9.6
33.0

(INR/t)
%change
(11.0)
(3.9)
NA
25.1
(4.7)
4.1
22.9
1.3
(0.3)
(7.1)
13.0

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24.9
1.1
10.3
6.8
7.8
24.4
24.8
11.3
11.3
33.0

MetalsandMining

Financialsnapshot(Consolidated)
YeartoMarch
Netrevenues
Dec/(inc)instock
Rawmaterial
Freightandhandling
Staffcosts
Purchaseofgoods
Powerpurchase
Otherexpenses
Totalexpenditure
EBITDA
Depreciation
EBIT
Otherincome
Interest
Add:Exceptionalitems
Profitbeforetax
Provisionfortaxes
Reportednetprofit
AdjustedProfit
Dilutedshares(mn)
AdjustedDilutedEPS

As%ofnetrevenues
Rawmaterial
Employeecost
Purchaseofpower
Freight&handling
Otherexpenses
EBITDA
Reportednetprofit
Taxrate

Q1FY16
303,003
(4,904)
86,931
20,310
48,958
28,424
14,485
81,058
275,261
27,742
13,465
14,277
7,622
10,980
1,584
12,503
5,154
7,630
6,698
971
6.9

28.7
16.2
4.8
6.7
26.8
9.2
2.5
41.2

Q1FY15
364,272
(5,926)
110,101
21,903
56,343
41,288
16,067
81,771
321,546
42,726
15,503
27,223
2,161
12,524
(2,625)
14,236
10,804
3,373
4,006
971
4.1

30.2
15.5
4.4
6.0
22.4
11.7
0.9
75.9

%change
(16.8)
NA
(21.0)
(7.3)
(13.1)
(31.2)
(9.8)
(0.9)
(14.4)
(35.1)
(13.1)
(47.6)
252.6
(12.3)
(160.4)
(12.2)
(52.3)
126.2
67.2

Q4FY15
336,662
21,641
88,110
23,008
54,261
24,593
14,352
95,267
321,232
15,430
15,127
303
1,394
11,952
(48,112)
(58,367)
(1,345)
(56,743)
(9,739)
971
(10.0)

%change
(10.0)
NA
(1.3)
(11.7)
(9.8)
15.6
0.9
(14.9)
(14.3)
79.8
(11.0)
4,619.8
446.7
(8.1)
(103.3)
(121.4)
(483.3)
(113.4)
(168.8)

26.2
16.1
4.3
6.8
28.3
4.6
(16.9)
2.3

FY15
1,395,040
10,930
407,698
147,245
214,079
138,043

351,687
1,269,682
125,358
59,436
65,922
7,962
48,478
(39,287)
(13,881)
32,172
(45,753)
84,592
971
87.1

29.2
15.3

10.6
25.2
9.0
(3.3)
(231.8)

(INRmn)

FY16E
1,296,692

283,900
152,898
228,078
143,046

354,943
1,162,864
133,828
61,598
72,230
7,453
51,018

28,664
12,899
16,065
16,065
971
16.5

FY17E
1,418,107

324,321
169,009
245,413
147,054

368,996
1,254,793
163,314
68,679
94,635
7,659
62,170

40,123
18,055
22,367
22,367
971
23.0

21.9
17.6

11.8
27.4
10.3
1.2
45.0

22.9
17.3

11.9
26.0
11.5
1.6
45.0

Pertonneperformance
Volume(mt)
Blendedrealisation(INR/t)
Cost(INR/t)
EBITDA(INR/t)

Q1FY16
Q1FY15
%change
Q4FY15
6.3
6.5
(2.0)
7.1
47,868 56,389
(15.1) 47,686
43,485 49,775
(12.6) 45,500
4,383 6,614 (33.7) 2,186

(INR/t)
%change
(10.3)
0.4
(4.4)
100.5

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TataSteel

Financialssnapshot(International)
YeartoMarch
Totalnetrevenues
Dec/(inc)instock
Purchaseofsemis
Rawmaterial
Staffcosts
Purchaseofpower
Freight&Handling
Otherexpenses
Totalexpenditure
EBITDA
Interest
Depreciation
Otherincome
PBT
Tax
Adjustednetprofit
Extraordinaryitems
Reportednetprofit
Outstandingshares(mn)
BasicEPS(INR)
as%ofnetrevenues
Rawmaterial
Purchaseofgoods
Staffcosts
Purchaseofpower
Freight&Handling
Otherexpenses
EBITDA
Adjustednetprofit
Reportednetprofit
Taxrate

Q1FY15
259,590
(2,492)
40,609
84,461
45,040
8,854
14,994
57,956
249,422
10,167
7,600
10,570
726
(7,277)
1,467
(8,744)
(10,504)
(19,248)
971
(20)

28.6
12.3
18.0
3.6
6.3
26.1
5.1
(2.7)
(2.4)
(17.6)

31.6
15.6
17.4
3.4
5.8
22.3
3.9
(3.4)
(7.4)
(20.2)

%change
(18.3)
NA
(35.8)
(24.3)
(15.3)
(14.8)
(10.9)
(4.4)
(19.3)
6.8
(7.6)
(16.9)
(81.6)
NA
(42.2)
NA
NA
NA

Q4FY15
230,313
15,997
22,469
60,979
42,580
8,004
15,296
66,348
231,672
(1,359)
6,628
9,403
708
(16,682)
809
(18,320)
(47,672)
(64,884)
971
(67)

NA

(INRmn)
%change
(7.9)
NA
16.0
4.8
(10.4)
(5.8)
(12.7)
(16.5)
(13.1)
NA
5.9
(6.6)
(81.2)
NA
4.8
NA
NA
NA
NA

33.4
9.8
18.5
3.5
6.6
28.8
(0.6)
(8.0)
(28.2)
(4.9)

(INR/t)
Q1FY16
Q1FY15
%change
Q4FY15
%change
4.1
4.3
(3.5)
4.6
(9.6)
51,348 60,652 (15.3) 50,397 1.9
48,719 58,276 (16.4) 50,694 (3.9)
2,628 2,375 10.6 (297)
NA

Pertonneperformance
Volume(mt)
Blendedrealisation(INR/t)
Cost(INR/t)
EBITDA(INR/t)

Q1FY16
212,066
(3,214)
26,060
63,927
38,134
7,542
13,357
55,406
201,211
10,856
7,021
8,783
133
(4,814)
848
(5,662)
526
(5,137)
971
(5)

EdelweissSecuritiesLimited

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MetalsandMining

CompanyDescription
Established100yearsagoin1907,TataSteelisAsiasfirstandIndiassecondlargestprivate
sector steel company. With the take over of Corus Steel (Europes second largest steel
producer),TataSteelisnowthesixthlargeststeelcompanyintheworldwithover30mtpa
of steel capacity. Tata Steels Indian operations are amongst the lowest cost producers of
steelintheworldcomprising9.7mtpasteelmakingfacilityatJamshedpurinJharkhand.

InvestmentTheme
The outlook for the global steel industry is challenging given 1) expectation of muted
recovery in global steel demand, 2) expected downward pressure on steel prices due to
slowdown in China, 3) rising exports from China and CIS countries, and 4) iron ore supply
glut. Given the weak fundamentals, the steel premiums in India are at a downward risk.
HighdebtandlowearningsgrowthwillkeepROEsdepressed.

KeyRisks

Sharprecoveryinglobalsteel/ironoreprices.

Sharpcostreduction.

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TataSteel

FinancialStatements
KeyAssumptions

YeartoMarch

FY14

FY15

GDP(YoY%)
Inflation(Avg)

6.9
9.5

7.4
5.9

8.0
5.0

8.7
5.0

Reporate(exitrate)

8.0

7.5

6.8

6.5

60.4

61.1

62.0

62.0

594

522

410

440

37

37

31

31

Totaloperatingexpenses

Hardcokingcoalprice(FOB,USD/t)

140

114

85

90

EBITDA

Softcokingcoalprice(FOB,USD/t)

128

96

72

76

Depreciation&Amortization

27

29

Macro

USD/INR(Avg)
Sector
HRCpriceEurope(exworks,USD/t)
HRCpriceIndia(net,INR'000/t)

Indiasteeldemandgrowth(%)
Company
Shipments(mntonnes)
India
Europe
SEA
BlendedRealisation(INR/t)

26

26

FY16E

FY17E

Incomestatement

YeartoMarch

FY14

FY15

Netrevenue
Materialscosts
Accretiontostock

10,930

170,076 138,043

143,046

147,054

Employeecosts

203,031 214,079

228,078

245,413

TotalSG&Aexpenses

341,206 351,687

354,943

368,996

PowerandFreight

150,437 147,245

152,898

169,009

EBIT
Add:Otherincome
Less:InterestExpense

163,314

59,436

61,598

68,679

105,698

65,922

72,230

94,635

5,168

7,962

7,453

7,659

43,368

48,478

51,018

62,170

9.4

10.9

Add:Exceptionalitems

(276) (39,287)

13.7

14.2

ProfitBeforeTax

67,221 (13,881)

28,664

40,123

4.0

3.6

3.6

3.7

Less:ProvisionforTax

30,582

32,172

12,899

18,055

Less:MinorityInterest

699

(133)

(133)

(133)

167

167

167

35,949 (45,753)

16,065

22,367

60,911 58,390 51,018

52,878

ReportedProfit

SEA

42,683 36,345 37,471

37,471

Less:ExceptionalItems(Netof

1,998

9,788

2,112

11,923 11,296 10,692

10,805

2,923

2,872

Europe(USD)

198

125

36,099

84,592

16,065

22,367

AdjustedBasicEPS

37.2

87.1

16.5

23.0

No.ofDilutedsharesoutstanding

971

971

971

971

AdjustedDilutedEPS

37.2

87.1

16.5

23.0

AdjustedCashEPS

95.9

AdjustedProfit
2,112

Power(cost/t)

2,872
80

2,872
88

Cokingcoal(cost/t)

118

98

74

78

StaffCost(GBPmn)

2,473

2,461

2,646

2,911

AverageInterestrate(%)

133,828

58,412

8.8

Europe

Ironore(cost/t)

164,110 125,358

13.7

Add:Shareofprofitfrom

Cokingcoal(cost/t)

1,322,030 1,269,682 1,162,864 1,254,793

8.5

42,301

Ironore(cost/t)

(5,147)

13.9

48,980 47,754 42,350

IndiaKeycosts(cost/tofsteel)

FY17E

1,486,140 1,395,040 1,296,692 1,418,107

462,427 407,698 283,900 324,321

Purchaseofgoods

India

Keycosts(cost/tofsteel)

(INRmn)
FY16E

(151) (130,345)

99.4

149.9

82.1

Dividendpershare(DPS)

8.0

8.0

8.0

8.0

DividendPayoutRatio(%)

25.3

(19.9)

56.6

40.6

Commonsizemetrics

6.3

7.0

7.1

8.4

YeartoMarch

FY14

FY15

FY16E

FY17E

AverageDepreciationrate(%)

10.6

11.6

12.1

9.5

Taxrate(%)

45.5 (231.8)

45.0

45.0

Operatingexpenses
Depreciation

89.0
3.9

91.0
4.3

89.7
4.8

88.5
4.8

Dividendpayoutratio(%)

25.3

(19.9)

56.6

40.6

InterestExpense

2.9

3.5

3.9

4.4

EBITDAmargins

11.0

9.0

10.3

11.5

258.0

187.1

158.5

169.2

2.5

6.1

1.2

1.6

36

51

43

49

18.2

(22.7)

(11.2)

(8.1)

EBITDA(USD/tonne)
India
Europe

NetProfitmargins

Growthratios(%)

Netborrowings(INRmn)

724,876 727,441 742,878 772,429

YeartoMarch

FY14

FY15

FY16E

FY17E

Capex(INRmn)

164,201 134,924 105,400

Revenues
EBITDA

10.3
33.2

(6.1)
(23.6)

(7.0)
6.8

9.4
22.0

SEA

Debtordays

62,000

37

38

38

37

Inventorydays

203

227

286

276

PBT

(262.7)

(120.6)

(306.5)

40.0

Payabledays

178

184

226

218

AdjustedProfit

(36.5)

134.3

(81.0)

39.2

62

82

98

95

EPS

(36.5)

134.3

(81.0)

39.2

Cashconversioncycle(days)

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MetalsandMining
Balancesheet

Ason31stMarch

FY14

FY15

(INRmn)

Cashflowmetrics

YeartoMarch

FY14

FY16E

FY17E

Sharecapital
Reserves&Surplus

9,714
9,714
9,714
395,606 303,780 310,620

9,714
323,762

Operatingcashflow
Investingcashflow

Shareholders'funds

405,320 313,494 320,334

333,476

Financingcashflow

MinorityInterest

17,377

16,906

16,773

Shorttermborrowings

291,191 149,185 149,185

149,185

Capex

Longtermborrowings

546,614 679,702 705,579

730,579

Dividendpaid

TotalBorrowings

837,805 828,887 854,764

879,764

DeferredTaxLiability(net)

25,958

Sourcesoffunds

17,039

28,845

28,845

28,845

1,366,404 1,280,379 1,312,963 1,350,972

Tangibleassets
IntangibleAssets

552,494 512,479 508,081

268,225 286,781 334,981

CWIP(incl.intangible)

39,088

34,449

719,402
116,981

NetcashFlow

FY15

FY16E

FY17E

131,459 118,798
(164,511) (84,221)

142,754
(98,080)

96,185
(54,474)

10,146 (26,172)

(34,234)

(46,263)

(22,907)

10,440

(4,552)

(164,201) (134,924) (105,400)

(62,000)

(9,092)

8,404
(9,092)

(9,092)

(9,092)

Profitabilityandefficiencyratios

YeartoMarch

FY14

FY15

FY16E

FY17E

ReturnonAverageEquity(ROAE)
PretaxReturnonCapital

9.4
9.6

22.4
6.1

4.8
6.8

6.5
8.4

InventoryDays

276

34,449

34,449

203

227

286

Totalnetfixedassets

859,806 833,709 877,511

870,832

DebtorsDays

37

38

38

37

Noncurrentinvestments

276,745 219,799 219,965

220,132

PaybleDays

178

184

226

218

Cashandcashequivalents

112,729 101,246 111,686

107,134

CashConversionCycle

62

82

98

95

Inventories

268,800 251,499 192,993

297,754

CurrentRatio

1.7

1.7

1.8

1.8

Tradereceivables

160,058 133,099 136,898

150,609

GrossDebt/EBITDA

510.5

661.2

638.7

538.7

31,930

46,029

46,029

46,029

GrossDebt/Equity

198.2

250.8

253.5

251.2

6,378

4,075

4,075

4,075

AdjustedDebt/Equity

198.2

250.8

253.5

251.2

TotalCurrentAssets(excash)

467,165 434,702 379,994

498,467

NetDebt/Equity

171.5

220.1

220.3

220.6

Tradepayable

229,129 191,899 159,016

228,416

InterestCoverageRatio

243.7

136.0

141.6

152.2

OtherCurrentLiabilities&Short

120,912 117,178 117,178

117,178

NetCurrentAssets(excash)

117,125 125,625 103,800

152,874

Loans&Advances
OtherCurrentAssets

Usesoffunds

1,366,404 1,280,379 1,312,963 1,350,972

Operatingratios

Year toMarch

FY14

FY15

FY16E

FY17E

1.2
2.6

1.1
2.5

1.0
2.4

1.1
2.2

EquityTurnover

3.8

3.7

3.9

4.1

FY14

FY15

FY16E

FY17E

37.2
(36.5)

87.1
134.3

16.5
(81.0)

23.0
39.2

99.4

149.9

82.1

95.9

6.3

2.7

14.1

10.1

PricetoBookRatio(P/B)(x)

0.6

0.7

0.7

0.7

EnterpriseValue/EBITDA(x)

5.9

7.8

7.4

6.2

DividendYield(%)
Marketcap/Sales(x)

3.4
0.7

3.4
0.7

3.4
0.8

3.4
0.7

417.3

322.7

329.8

YeartoMarch

FY14

FY15

FY16E

FY17E

ReportedProfit
Add:Depreciation

35,949 (45,753)
58,412 59,436

16,065
61,598

22,367
68,679

Valuationparameters
YeartoMarch

Interest(NetofTax)

23,638 160,838

28,060

34,194

Others

242,436 (141,749)

69,615

8,954

AdjustedDilutedEPS(INR)
YoYgrowth(%)

Less:ChangesinWC

228,976 (86,025)

32,584

38,009

AdjustedCashEPS(INR)

Operatingcashflow

131,459 118,798 142,754

96,185

DilutedPricetoEarningsRatio

Less:Capex

164,201 134,924 105,400

62,000

FreeCashFlow

(32,742) (16,126)

34,185

(INRmn)

37,354

TotalAssetTurnover
FixedAssetTurnover

BookValuepershare(INR)

Freecashflow

343.3

Peercomparisonvaluation

Marketcap

Name
TataSteel
BhushanSteelLtd
JindalSteel&Power
JSWSteel
POSCO
SteelAuthorityofIndia

DilutedPricetoEarnings

EnterpriseValue/EBITDA(X)

ReturnonAverageEquity

(USDmn)

FY16E

FY17E

FY16E

FY17E

FY16E

FY17E

4,350

14.1

10.1

7.4

6.2

4.8

6.5

244

1,208

14.6

2.4

8.6

5.4

1.7

10.7

3,178

183.6

36.0

7.1

5.8

0.5

2.3

16,184

10.9

9.2

6.7

6.4

3.9

4.5

3,795

17.0

5.9

11.7

6.3

3.1

8.7

Source:Edelweissresearch

10

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TataSteel

AdditionalData
DirectorsData
BMuthuraman
IshaatHussain
JacobusSchraven
KarlUlrichKoehler
MallikaSrinivasan
OPBhatt
T.V.Narendran

ViceChairman
Director
Director
Director
AdditionalDirector
AdditionalDirector
ManagingDirectorIndiaandSouthEastAsia

NusliNWadia
SubodhBhargava
AndrewRobb
Cyrus PMistry
KoushikChatterjee
D.K.Mehrotra

Director
Director
Director
Chairman
WholetimeDirector
Independent,NonExecutiveDirector

AuditorsDeloitteHaskins&Sells
*asperlastannualreport

HoldingTop10
Perc.Holding
LifeInsuranceCorpOfIndia

Perc.Holding

14.59

HdfcAssetManagementCoLtd

RelianceCapitalTrusteeCoLtd

1.50

DimensionalFundAdvisorsLp

2.10
1.48

NewIndiaAssuranceCoLtd

1.22

NationalInsuranceCoLtd

1.17

IciciPrudentialLifeInsurance

1.13

GovernmentPensionFundGlobal

0.89

VanguardGroupInc

0.73

NorgesBankInvestmentManagemen

0.66

*asperlastavailabledata

BulkDeals
Data

NoDataAvailable

Acquired/Seller

B/S

QtyTraded

Price

*inlastoneyear

InsiderTrades
ReportingData

NoDataAvailable

Acquired/Seller

B/S

QtyTraded

*inlastoneyear

11

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