Tata Metaliks dips 7% on reporting weak operating margin in Q2

In Q2, EBITDA margin came in at 15.5 per cent, lower by 998 basis points (bps) QoQ and 559 bps YoY on the back of higher operating costs

Shares of Tata Metaliks dipped 7 per cent to Rs 1,058.40 on the BSE in Tuesday’s intra-day trade after reporting disappointing performance on the margin front for the September quarter (Q2FY22) due to higher raw material cost.

For Q2FY22, Tata Metaliks' revenue from operations grew 24 per cent year-on-year (YoY) to Rs 644.84 crore. However, earnings before interest, taxes, depreciation, and amortization (EBITDA) margin came in lower both quarter-on-quarter (QoQ) as well as YoY. EBITDA margin came in at 15.5 per cent, lower by 998 basis points (bps) QoQ and 559 bps YoY. The company’s profit after tax declined 33 per cent at Rs 54.62 crore as against Rs 82 crore in the year-ago quarter.

“EBITDA margin for Q2FY22 declined both QoQ as well as YoY on the back of higher operating costs. During Q2FY22, raw material expenses as a percentage of sales came in at 60.2 per cent compared to 49.7 per cent in Q2FY21 and 50.1 per cent in Q1FY22,” ICICI Securities said in results update.

Pig Iron is vulnerable to market volatilities of raw material prices and steel prices. Therefore, the company works on these risks and mitigates them to the extent possible by optimizing the raw material procurement cost, controlling the blast furnace operational parameters and differentiating its products through customization, technical services and other brand promises, Tata Metaliks said in FY21 annual report.

"The DIP demand has been growing at double-digit rate over the last 5-6 years excluding FY20-21 due to impact of COVID-19. Going forward, the growth in demand is expected to be even higher with the government’s priority and renewed thrust on water. Hence, the long-term risks of DI Pipe demand going down is quite low. However, liquidity issues could be a matter of concern in some states," it added.

Tata Metaliks is a subsidiary of Tata Steel. The company is engaged in the manufacture and sale of pig iron and ductile iron pipes. It has its manufacturing plant at Kharagpur in the state of West Bengal.

At 10:04 am, Tata Metaliks was trading 5 per cent lower at Rs 1,080 on the BSE, as compared to a 0.02 per cent rise in the S&P BSE Sensex. With today’s fall, the stock has declined 23 per cent from its 52-week high level of Rs 1,374 touched on May 4, 2021.