Hitting a 52-week high last Friday, the stock of Tata Steel closed the week 5.6 per cent up. This was aided by the company’s good show in 2013-14. That this was achieved in a year of modest growth in steel demand seems to have caught the market’s attention. Helped by higher sales revenue, Tata Steel reported net profit of ₹3,595 crore for the year ending March 2014, as against loss in the year before. An impairment charge of ₹8,356 crore in the year before had dented numbers. That said, Tata Steel improved its operational performance too in 2013-14.
Continued focus on value-added products helped the company grow its volumes 10.4 per cent to 26.6 million tonnes. In India, sales of automotive and special products grew 15 per cent, while in Europe, the volumes of value-added products rose 16 per cent.
Operating profit at the high-margin Indian business rose 13.5 per cent to ₹13,281 crore, while in Europe it quadrupled to ₹3,008 crore. According to the company, cost-cutting initiatives generated savings of about ₹1,970 crore in Europe. The Indian and the European operations account for 90 per cent of the company’s consolidated revenues.
Despite the recent rally, the stock at ₹440.5 trades cheap. It quotes at about 1.1 times its estimated book value for 2014-15, at the lower end of its five-year valuation band of 0.8-2.1 times.