Tata Metaliks Ltd Q3 FY22 Earnings Conference Call Summary

Key highlights from Tata Metaliks Ltd (TATAMETALI) Q3 FY22 Earnings Concall

Management Update:

•  Sandeep Kumar commented that TATAMETALI’s performance in Q3 was mixed, but lower than what the company expected, due to higher raw material costs. However, on the ductile iron pipe side, the company saw a sales surge, which was up 30%.

Q&A Highlights:

•  Analyst Mithun Ashwath asked about the expansion of the ductile iron pipe facility and if it’s on schedule. MD Sandeep Kumar said that it’s going to be completed in phases and the first phase is expected to be completed by March.

• On a question from Mithun about the status of Tata Steel Long Products merger, Sandeep commented that it’s getting delayed due to usual process of regulatory clearances. He also added that the company doesn’t really know how long it will take to close it.

• Rohan, an individual investor, queries about what percentage of company’s sales go into older contracts and also enquired if iron ore and coking coal is hedged. MD Sandeep said that about 70% of company’s sales go to older contracts. And on the hedge question, Sandeep commented that mainly coking coal is hedged.

• Bharat Sheth from Quest Investment Advisors asks about the iron ore price fluctuation that happened in the year and the prevailing average price. MD Sandeep answered that the price did peak in June-July but after that it started slowly coming down. Since the company keeps 2-3 months of inventory in hand, TATAMETALI had little impact of the price rise on its sales. Sandeep also said that the prevailing iron ore price is in the range of $320-330 in the international market.

• Bharat Sheth also enquires about the delta between current and old market price of pig iron pipe. Sandeep answered that the price moved up by almost 40% to 45% compared to last year. On a comparative basis, Sandeep clarified that if prices were INR 50,000 per ton last year, then today it is in the range of INR 70,000 to INR 75,000.

• Vinit Malu of Birla Sun Life Asset Management questioned about how much will be the coking coal inventory the company will be having and the quarter-on-quarter impact for the expected shift in cost per tonne. CFO Subhra Sengupta said that for PAT, it expects cost due to coal and coke to go up by about INR2,000, INR3,500 or INR3,000 to INR4,000 per tonne of metal. However, the company expects to contain this increase, as it expects its furnace to do better.

• Falguni of Jet Age Securities asks about the outlook for Ductile Iron Pipe business in terms of pricing and demand plan. MD Sandeep answered that there is visibility of demand of 4.8 million tonnes in the long term. While on the supply side, the installed capacity of the industry is roughly 2.6 million tonnes and the company is seeing a demand growth of double digits (10-12%) over the next 5-7 years.

• On a question from Yogansh Jeswani of Mittal Analytics, about the company’s order book and in the current situation if TATAMETALI believes the demand is not as per the expectation, MD Sandeep Kumar answered by saying that as the prices have started to rise, the company has been choosy in picking up orders over the last 9-12 months. But added that a 9-10 month order book that the company now has is something that one should be happy about.

• Saket Kapur from Kapoor & Company asked about pig iron and what percentage of it was exports for the company. CFO Subhra said that for the current quarter, the company expects exports to be not more than 5%. Last quarter it was higher as the company did one pulp shipment of around 20%.