Accumulate Tata Steel; target of Rs 496: PLilladher

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Accumulate Tata Steel; target of Rs 496: PLilladher

Prabhudas Lilladher is bullish on Tata Steel and has recommended accumulate rating on the stock with a target of Rs 496 in its February 10, 2012 research report.

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Prabhudas Lilladher is bullish on Tata Steel and has recommended accumulate rating on the stock with a target of Rs 496 in its February 10, 2012 research report.

"Tata Steel reported Q3FY12 earnings below ours as well as consensus estimates due to inventory write-down of Rs7.4bn in Tata Steel Europe (TSE). We see improved earnings momentum in FY13, driven by lag benefit of firm spot and contract prices associated with re-stocking across the markets and soft input prices."

"Tata Steel reported 50% decline in consolidated EBITDA at Rs17.2bn, much below our estimate of ~Rs22.1bn. Adjusted for the write-down, EBITDA stood ahead of our expectation at Rs24.6bn, while, on PAT, company reported loss of Rs6bn (PLe: Rs3.7bn loss). Despite better-than-expected realisations at Rs37,752 (PLe: Rs37,439)/tonne, Indian ops reported EBITDA below our expectation at Rs26.3bn (PLe: Rs27.4bn) due to higher-than-expected coking coal and handling costs. EBITDA per tonne fell short of our expectation at Rs16,218 (PLe: Rs17k), down 6% YoY and 4% QoQ. Surprisingly, TSE's adjusted EBITDA declined merely by US$19/tonne QoQ to loss of US$1 (PLe: US$20)/tonne despite US$43/tonne fall in realisations and elevated cost levels." Given the underlying strength in prices associated with re-stocking, soft input prices and increased contribution from Mozambique and Canada DSO iron ore project, we see stable to firm earnings outlook ahead."

"We maintain 'Accumulate' rating with TP of Rs496, EV/EBITDA of 6x FY13E," says Prabhudas Lilladher research report.  

Institutional holding more than 40% in Indian cos

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To read the full report click on the attachment