Tata Steel shares fall 6% post Q4 Results; Should you buy the dip?

Tata Steel unveils Q4 FY24 results with a 65% drop in profits and a modest fall in revenue from operations. Delve into the details and explore future prospects.

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Shares of Tata Steel plunged up to 6% on Thursday, making it the biggest loser in the Nifty 50 Index, after the company released its fourth-quarter results. The steel major reported a significant 65% drop in its consolidated profit to Rs 517 crore, impacted by lower steel realizations across various geographies.

Tata Steel Net Profit
Tata Steel Net Profit

The consolidated revenue from operations also saw a decrease, falling 6.8% to Rs 58,863 crore from Rs 63,131 crore year-over-year. This drop can be attributed to aggressive competition and an influx of cheaper imports, notably from China. 

Meanwhile, the steel giant has proposed a dividend of Rs 3.6 per share with a face value of Re 1 each for FY24. Additionally, the board has approved the proposal to infuse funds up to $2.11 billion (Rs 17,407.50 crore) into a wholly-owned subsidiary T Steel Holdings (TSHP) Singapore to repay debt and to support the restructuring costs at Tata Steel UK.

Outlook and Investment Opportunities 

Despite the fall in hot rolled coil (HRC) prices by approximately 6% year-over-year and stagnant month-on-month rates due to weak global demand and oversupply from China, there are positive signs on the horizon. The decrease in prices for coking coal and iron ore in the current quarter is likely to boost margins in FY25. 

The India operations are expected to show resilience with strong domestic demand fuelled by infrastructure developments and the automotive sector. The steel major has announced expansion plans in India with a capital expenditure of Rs 17,000 crore for FY25, approximately 75% of which is aimed at meeting this increasing domestic demand.

Regarding international businesses, the management expects the Netherlands operations to turn EBITDA-positive by Q1 FY25 as all blast furnaces are projected to be fully operational, boosting production volumes. As for the UK, the management acknowledges ongoing challenges but is optimistic about achieving a positive EBITDA in the second half of the year, following the shutdown of the blast furnaces.

Should you buy Tata Steel at current levels?

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