Tata Metaliks share dips over 8% as Q1 PAT declines 99% YoY

Tata Metaliks shares fell 8% to Rs 645 on the BSE in midday trade on Thursday after the company announced a steep drop in profit after tax (PAT) to Rs 1.22 crore in the June quarter (Q1FY23) due to increasing raw material costs. In the previous quarter, the Tata Group entity engaged in the pig iron industry reported a PAT of Rs 94.72 crore (Q1FY22).

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On a year-on-year (YoY) basis, the sales volume of Pig Iron and DI Pipe declined by 23% and 8%, respectively, during the quarter, owing largely to a weakening of the Pig Iron market outlook beginning in mid-May. Pig iron prices fell sharply in the market when the government imposed an export duty on May 22, 2022.

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However, revenue climbed by 11% year on year, owing to the improved realisation of both Pig Iron and DI Pipe by 36 to 40%.

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“On the raw materials front, coal and coke prices moved up significantly (coke price was up 30% over March 2022 quarter or Q4). Profitability was severely impacted in the quarter owing to these factors,” Tata Metaliks said.

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Significant increases in coal, coke, and consumable prices, as well as the continued drag of old orders (booked in FY21) of DI Pipe and a sharp drop in Pig Iron prices following the imposition of a 15% export duty on Pig Iron, have severely harmed the company’s profitability during the quarter, according to the company.

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Despite the fact that the July-September quarter (Q2) is a seasonally poor quarter, the government’s increasing investment in water infrastructure is likely to maintain demand for DI Pipes solid. Subsequent quarters are likely to be considerably better, with demand for DI Pipe rising up and being backed by further volumes from the new DI Pipe factory, it added.

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Meanwhile, since the beginning of July, the Pig Iron market has stabilized and has shown a slight upward trend. Coal prices have dropped significantly with Prime hard coking coal has come down from $500/t FOB average in May to below $300/t average in July. All these factors present a positive outlook for Pig Iron business in Q2, it added.

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Tata Metaliks was trading 4.73% lower at Rs 669.10 at 12:00 p.m., compared to a 0.11% decrease in the S&P BSE Sensex. On June 20, 2022, the stock reached a 52-week low of Rs 622.45. Furthermore, it has more than halved from its 52-week high of Rs 1,364.90 on July 30, 2021.