Tata Steel EBITDA dropped on 23.6% in 2015 and EBITDA Margin decreased on 2.1 pp from 11.1% to 9.1%

20-05-2015 • About Tata Steel ($TATASTEEL) • By InTwits

Tata Steel reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Tata Steel has medium CAPEX intensity: 5 year average CAPEX/Revenue was 10.0%. At the same time it's in pair with industry average of 13.5%.
CAPEX is quite volatile: 920 in FY2015, 1,890 in FY2014, 550 in FY2013, 1,300 in FY2012, 990 in FY2011
The company has potentially unprofitable business model: ROIC is at 5.4%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Tata Steel ($TATASTEEL) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	1,171,498	1,322,574	1,334,166	1,473,473	1,383,189	-6.1%
EBITDA	159,956	124,168	123,212	164,110	125,358	-23.6%
Net Income	89,827	53,898	-70,576	35,949	-39,255	-209.2%
Balance Sheet
Cash	108,591	107,988	98,339	86,045	87,499	1.7%
Short Term Debt	114,281	146,585	216,497	292,422	150,261	-48.6%
Long Term Debt	492,507	452,382	468,576	523,664	656,752	25.4%
Cash flow
Capex	95,884	120,777	154,715	164,201	134,924	-17.8%
Ratios
Revenue growth	15.1%	12.9%	0.9%	10.4%	-6.1%
EBITDA growth	98.9%	-22.4%	-0.8%	33.2%	-23.6%
EBITDA Margin	13.7%	9.4%	9.2%	11.1%	9.1%	-2.1%
Net Income Margin	7.7%	4.1%	-5.3%	2.4%	-2.8%	-5.3%
CAPEX, % of revenue	8.2%	9.1%	11.6%	11.1%	9.8%	-1.4%
ROIC	12.8%	7.6%	6.2%	8.9%	5.4%	-3.6%
ROE	30.8%	13.8%	-18.4%	9.6%	-11.4%	-21.0%
Net Debt/EBITDA	3.1x	4.0x	4.8x	4.4x	5.7x	1.3x

Revenue and profitability

Tata Steel's Revenue decreased on 6.1% in FY2015. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 2.1 pp from 11.1% to 9.1% in FY2015.

Net Income marign decreased on 5.3 pp from 2.4% to -2.8% in FY2015.

Capital expenditures (CAPEX) and working capital investments

Tata Steel's CAPEX/Revenue was 9.8% in FY2015. Tata Steel showed small growth in CAPEX/Revenue of 0.62 pp from 9.1% in FY2012 to 9.8% in FY2015. It's average level of CAPEX/Revenue for the last three years was 10.8%.Battling declining revenue the company made large investments to CAPEX (108% of EBITDA) but that didn't help at least in this year.

Return on investment

The company operates at low but positive ROIC (5.36%) and negative ROE (-11.41%). ROIC decreased on 3.6 pp from 8.9% to 5.4% in FY2015. ROE dropped on 21.0 pp from 9.6% to -11.4% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 5.7x and Debt / EBITDA is 6.4x. Net Debt / EBITDA jumped on 1.3x from 4.4x to 5.7x in FY2015. Debt decreased slightly on 1.1% in FY2015 while cash increased slightly on 1.7% in FY2015.

Appendix 1: Peers in Iron & Steel/Interm.Products

Below you can find Tata Steel benchmarking vs. other companies in Iron & Steel/Interm.Products industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Inducto Steel ($INDCTST)			54.5%	150.2%
Kamdhenu Ispat ($KIL)	-65.5%	25.7%	13.7%	68.3%
Metkore Alloys & Industries ($METKORE)	-49.1%	43.7%	-10.9%	53.4%
Tata Metaliks ($TATAMETALI)		-7.0%	-19.0%	44.6%	-1.3%
Visa Steel ($VISASTEEL)	-12.5%	3.3%	-24.1%	42.0%
Median (31 companies)	-41.6%	11.9%	8.8%	2.8%	3.4%
Tata Steel ($TATASTEEL)		12.9%	0.9%	10.4%	-6.1%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Jindal Steel & Power ($JINDALSTEL)	48.3%	37.5%	30.5%	28.1%
Bhushan Steel ($BHUSANSTL)	29.0%	31.2%	32.3%	28.1%
Sarda Energy & Minerals ($SARDAEN)	15.2%	16.3%	21.5%	21.3%
Jsw Steel ($JSWSTEEL)	20.2%	17.8%	17.1%	17.9%	17.7%
Jai Corp ($JAICORPLTD)	18.4%	14.1%	16.3%	16.0%	12.7%
Median (28 companies)	13.0%	9.5%	9.0%	7.0%	11.8%
Tata Steel ($TATASTEEL)	13.7%	9.4%	9.2%	11.1%	9.1%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Jindal Steel & Power ($JINDALSTEL)	64.7%	34.2%	47.6%	69.6%
Bhushan Steel ($BHUSANSTL)	81.1%	47.2%	44.0%	50.4%
Jayaswal Neco Industries ($JAYNECOIND)	27.9%	20.4%	44.0%	31.1%
Surana Industries ($SURANAIND)		41.3%	54.8%	21.5%
Steel Authority Of India ($SAIL)	25.3%	20.9%	20.7%	19.3%
Median (20 companies)	12.3%	8.0%	10.4%	6.6%	3.4%
Tata Steel ($TATASTEEL)	8.2%	9.1%	11.6%	11.1%	9.8%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tata Metaliks ($TATAMETALI)	3.1%	-23.5%	-3.7%	19.9%	57.4%
Nova Iron & Steel ($NOVIS)				15.4%
Kirloskar Ferrous Industries ($KIRLFER)	20.0%	19.1%	16.8%	12.4%	14.7%
Pennar Industries ($PENIND)	31.6%	26.8%	18.4%	12.3%	15.7%
Jsw Steel ($JSWSTEEL)	9.7%	11.0%	10.3%	12.1%	9.9%
Median (40 companies)	9.4%	6.8%	5.5%	5.5%	14.7%
Tata Steel ($TATASTEEL)	12.8%	7.6%	6.2%	8.9%	5.4%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Jai Balaji Industries ($JAIBALAJI)	5.5x			89.7x
Visa Steel ($VISASTEEL)	6.9x	20.1x		24.4x
Ismt ($ISMTLTD)	4.4x	5.3x	9.8x	19.9x
Kic Metaliks ($KAJARIR)	6.6x	9.2x	3.0x	18.2x
Bhushan Steel ($BHUSANSTL)	8.1x	6.3x	8.6x	12.9x
Median (29 companies)	3.8x	4.6x	4.3x	3.2x	1.1x
Tata Steel ($TATASTEEL)	3.1x	4.0x	4.8x	4.4x	5.7x

Tata Steel stock price chart

Tata Steel financials

mln.	FY2010	FY2011	FY2012

Revenue	1,017,578	1,171,498	1,322,574
EBITDA	80,427	159,956	124,168
Net income	-20,092.200	89,827	53,898
CAPEX	71,495	95,884	120,777
Debt	531,004	606,788	598,968
Cash	68,151	108,591	107,988

About Tata Steel

Tata Steel Limited manufactures and sells steel and steel products in India and internationally. It operates through Steel, Ferro Alloys and Minerals, and Others segments. The company offers steel products to vehicle manufacturers and component suppliers, and aerospace sector; structural frames, infrastructure, building envelope, and internal fit out application products used for heating and ventilation, partition walls, etc.; and hot rolled coil products and high-gloss pre-finished steel perforated blanks primarily for use in domestic appliances, furniture and office equipment, racking and shelving, battery cases, bake-ware, and lighting applications. It also provides hot rolled and cold rolled sheets, wire rod and wire, sections, plates, bearings, and tubes for engineering companies; agricultural implements; wire products for farming and fencing applications; and engineering services. In addition, the company offers tinplate, ECCS, and Protact polymer-coated steel products for can making industry; formable steels for steel drums, and pails in the industrial packaging sector; strips and coils, quenched and tempered plates, and special profiles for track shoe and forklift masts, as well as engineered steel bars and tubes for lifting and excavating sector; welded pipeline packages and prefabricated structural products for wind, and oil and gas structures; light fabricated systems for solar farm foundations; and semi finished steel components for drilling and power generation. Further, it provides plates, bulb flats, angles, tubes, sections, and bars for shipbuilding; rail sections size, steel sleeper, noise reduction, other specialized track, and rail products for rail sector; and steel plate and sections, armored steel, blast protective structures, perimeter security, and anti-attack vehicle barriers, as well as engineering consultancy and solutions for defense and security sector. The company was founded in 1907 and is headquartered in Mumbai, India.