Tata Steel declares results. Time to start booking profits

Stocks

oi-Shoaib MD

By Shoaib Md

Published: Thursday, May 26, 2011, 16:39 [IST]

Tata Steel declared reported its result with an increase in revenue by 13% over Q4 FY10 when compared to Q4FY11. Although net profit reported for the same period saw a decline of 21%.

The sales figure also saw contribution from the European division. The analysts community has cautioned that European businesses still face pressure on rising raw materials. There is also a possibility of decline in sales in the coming months.

Besides strong sales in the country, there has also been a one-time gain from plant sale in U.K. and a jump in sales volumes at its European business.

The Tata Steel's India operations has benefitted as the unit has its own mines and hence is less affected by increase in raw material costs unlike its European counterpart.

In FY11, the Indian operations contributed only a quarter of consolidated sales but the same section contributed nearly 80% of the profits.

In terms of raw numbers, the sales figure of its European unit adds up to a huge number in total sales. But it hardly contributes anythign to profit.

Mumbai-based Angel Broking said it expects Tata Steel"s overall profitability to decline in the six months from April 1, compared to the previous three months, because of high coking coal prices.

According to another report, the revenue at the European unit during the quarter was driven by 'opportunistic sales' since customers were purchasing in anticipation of an increase in steel prices. Now the situation has reversed as customers now expect prices to fall.

Technical View

Looking at the simple moving averages of 50, 100 and 200 days, the stock is in a stagnant phase. The patterns are presenting a negative bias. If this stock does not move upwards in the next few sessions then perhaps it would be a goof time to book profits and wait for the start of some positive trend.

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