Tata Metaliks

Tata Metaliks (TML) 3QFY23 results first cut: Blast furnace issues lead to disappointing performance* *Revenue:* Rs 7.9bn, +15% yoy; -10% qoq *PI sales* volume: 63kt, -16% yoy; -24% qoq and Realisation at Rs 47,995; flat yoy,-7% qoq realisation eased qoq as a result of poor market demand; volumes declined due to issues and stoppage of one blast furnace *DI pipe* sales volume: 77kt, +15% yoy; +10% qoq and Realisation at Rs 63,358; +28% yoy, flat% qoq. Volumes ramped up due to full operation at new DI pipe plant (25kt in 3QFY23) *RM cost/tonne:* Rs38,224/tonne; +19% yoy and -7% qoq due to correction in coking coal cost. *EBITDA:* Rs 387mn; -43% yoy; -5% qoq; EBITDA margins of 5% vs 10% yoy; 5% qoq; margins declined due to poor Pig iron volumes and maintenance cost, partly offset by reduction in coking coal cost. *Adj. PAT:* Rs95mn; -74% yoy; -34% qoq further hit by increase in finance cost *Order book:* 7-8months *Expansion projects:* New DI pipe plant phase 1 is running at full utilisation *Our view:* We believe that 3QFY23 was very poor performance due to operational issues at blast furnace which is now repaired. We expect that financials will surely improve in Q4fy23 due to highest offtake in both DI and PI. We remain positive on the prospects due to complete rampup of volumes and strong outlook for DI pipe. However, the stock is now linked to swap ratio due to its pending merger with Tata steel.