Disclaimer: This is not a recommendation for buying Tata Steel or any other metal stock but a simple way to see through Quarterly result.
Tata Steel declared its Qr result and the market is discounting the price as if a 100-year-old company is going bankrupt. Yes, one should worry about such bad results, but knowing the math is better to just go the herd way.
If you see the results, Sales are almost flat at 32000 Cr, but if you see the cost of raw materials as a percentage, it has increased from 30% of sales to 50%. As we know PBIT is sales minus cost, hence there is a significant drop in profits.
All other costs are almost same including Employee and Depre. Though the input costs have come down now, from what it was but in accounting FIFO is used. FIFO is first in First Out, means what ever material at high cost was purchsed is to be expanded first in the books of accounting.
Same effect is seen in the Reliance results, when crude prices falls but results are not good, as the inventory which was refined was at high cost.
We generally like such beaten down stocks, as my holding is 5 to 10 years. But it is not preffered way of investing.
Thought , this is the right example of Results analysis.
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