Accumulate Tata Steel; target Rs 470: P Lilladher
Prabhudas Lilladher is bullish on Tata Steel and has recommended accumulate rating on the stock with a target price of Rs 470 in its August 14, 2012 research report.
August 18, 2012 / 15:04 IST
Prabhudas Lilladher is bullish on Tata Steel and has recommended accumulate rating on the stock with a target price of Rs 470 in its August 14, 2012 research report.
"Tata Steel`s EBITDA declined by 11% YoY (7% QoQ) to Rs27.8bn (PLe: Rs27.8) on account of forex loss of Rs2bn (gain last year), higher employee cost and outside purchase of coke. Despite 29% YoY (5% QoQ) rise in cost at Rs38,542/t, company was able to achieve its EBITDA/t guidance of Rs17,500 for the quarter on the back of 13.5% YoY (4.4% QoQ) increase in realisations at Rs56,025/t. PAT declined 21% to Rs13.6bn, below our expectation of Rs14.7bn on account of higher tax rate at 36% (PLe: 32%).TSE’s sales volumes declined 8% YoY (9.6% QoQ) to 3.2m (PLe: 3.2m) tonnes. Realisations rose by US$40/tonne QoQ to US$1143, ahead of our expectation of US$1130. Higherthan- expected realisations led TSE to beat our expectation, with EBITDA/t at US$35 (PLe: US$17) compared to US$8 in Q4FY12 and US$77 in Q1FY12. EBITDA declined 59% YoY to US$111m (PLe: US$54m).Key highlights of earnings con-call: 1) TSE would see compression in spreads in Q2FY13 on the backdrop of fall in realisations sharper than cut in input prices 2) Management expects H2 better compared to H1 for TSE on the back of current bottomed-out demand, better spreads and leaner operations 3) Maintained guidance of 1m tonne incremental volumes in domestic operations beginning from Q3FY13 4) Newly commissioned BF-I at Jamshedpur operated near its rated capacity during quarter 5) Capex guidance of US$2-2.3bn in FY13.Tata Steel reported Q1FY13 earnings above our expectation on account of betterthan- expected earnings in Tata Steel Europe (TSE). Strong domestic operations (~80% of consol. EBITDA), bottomed-out earnings in TSE and comfort on valuations remains our key rationale for ‘Accumulate’ rating, with target price of Rs 470, 6x EV/EBITDA FY13E," says Prabhudas Lilladher research report.FIIs holding more than 30% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
Read More
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
