Tata Metaliks plunges 8% on disappointing Q1

Shares of Tata Metaliks tumbled over 8% on Thursday after the pig iron manufacturer reported sharp losses in the April-June quarter of the current fiscal due to higher expenses amid surge in raw material costs. As per the company, the pig iron business got adversely impacted due to lower production and higher cost arising out of the annual maintenance shutdowns as well as a significant increase in coal, coke, and consumable prices. The profitability was also impacted by the government’s decision to impose a 15% export duty on pig iron.

The company, a subsidiary of Tata Steel, reported a net profit of ₹1.22 crore in Q1FY23, as compared to ₹94.72 crore in the same period last year, registering a year-on-year decline of 98.71%. During the quarter under review, the expenses surged to ₹667.72 crore, from ₹471.62 crore a year ago.

Net sales of the Tata Group company, however, rose 10.5% to ₹666.37 crore in the June quarter of 2022, from ₹602.97 crore in the corresponding period last year. The revenue was driven by the increased realisation of both pig iron and DI pipe by around 36% to 40%. However, sales volume of pig iron & DI Pipe were lower by 23% & 8%, respectively, on a y-o-y basis, owing primarily to softening of the market sentiment of pig iron from mid-May onwards. The pig iron prices also witnessed a sharp drop in market prices after the government imposed an export duty on steel products. On the Raw materials front, coal and coke prices moved up significantly (coke price was up 30% over Q4).

The Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA) tumbled 82.7% to ₹27.11 crore in June 2022, compared with ₹156.99 crore in June 2021.

Reacting to Q1 results, shares of Tata Metaliks opened lower at ₹662 against the previous closing price of ₹702.35 on the BSE. Extending opening losses, the stock fell as much as 8.17% to hit an intraday low of ₹645. On the volume front, more than 33,000 shares worth ₹2.16 crore changed hands over the counter as compared to the two-week average volume of 4,736 stocks. The market capitalisation of the smallcap stock dropped to ₹2,111.90 crore.

The stock trades near its 52-week low of ₹622.45 touched on June 20, 2022, while it touched its 52-week high of ₹1,364.90 on July 30, 2021. Tata Metaliks shares had given a negative return of 46% in the past one year, while it has fallen 21% in the calendar year 2022 (year-to-date basis). The share price trades lower than 5-day, 20-day, 50-day, 100-day, and 200-day moving averages, with the stock falling 5% in a week and 6.5% in the past one month.

Commenting on Q1 results, Sandeep Kumar, managing director of Tata Metaliks said: “While ductile iron pipes (DIP) business has delivered close to its planned volumes, the pig iron business got adversely impacted due to lower production and higher cost arising out of the annual maintenance shutdowns and also on account of operational issues in one of the blast furnaces for much of April and May. Significant increase in coal, coke & consumable prices, continuing drag of old orders (booked in FY21) of DI Pipe and a sharp drop in pig iron prices post imposition of 15% export duty on Pig Iron have severely dented our profitability this quarter.”

Tata Metaliks is a subsidiary of Tata Steel which started its commercial production in 1994. It has its manufacturing facilities at Kharagpur, West Bengal, India which produces pig iron and ductile iron pipes. The plant annually produces around 600,000 tonnes of hot metal, out of which over 200,000 tonnes is converted into DI Pipes and the rest into pig iron.