Buy Tata Steel; target Rs 510: Angel Broking

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Buy Tata Steel; target Rs 510: Angel Broking

Angel Broking is bullish on Tata Steel and has recommended buy rating on the stock with a target price of Rs 510 in its November 11, 2011 research report.

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Angel Broking is bullish on Tata Steel and has recommended buy rating on the stock with a target price of Rs 510 in its November 11, 2011 research report.

"Tata Steel reported disappointing profitability for 2QFY2012. The company's profitability suffered on account of higher raw-material costs and subdued demand at Tata Steel Europe (TSE). Nevertheless. Higher realization leads to top-line growth: Tata Steel's consolidated net sales increased by 14.5% yoy to Rs 32,798cr (above our estimate of Rs 30,936cr) mainly on account of higher average realization. Tata Steel India's net sales increased by 15.7% yoy to Rs 8,142cr and average realization/tonne increased by 18.6% yoy to Rs 46,402. However, TSE's average realization/tonne decreased by 1.0% yoy to US$1,148 on account of subdued demand in Europe."

"Tata Steel India's sales volumes decreased by 0.7% yoy to 1.65mn tonnes and TSE's sales volumes decreased by 1.7% yoy to 3.48mn tonnes in 2QFY2012. EBITDA/tonne decreased by 19.1% and 47.0% yoy to US$364 and US$30 in Tata Steel India and TSE operations, respectively, as increased realization (at India operations) was more than offset by higher raw-material costs. Consolidated EBITDA decreased by 25.1% yoy to Rs 2,750cr. Other income fell to Rs 120cr in 2QFY2012 compared to Rs 814cr in 2QFY2011. Consolidated reported net profit stood at Rs 212cr in 2QFY2012 compared to Rs 1,979cr in 2QFY2011. Adjusted net profit decreased by 81.4% yoy to Rs 362cr, significantly below our estimate of Rs 1,339cr. Standalone net profit during the quarter decreased by 27.6% yoy to Rs 1,495cr. We continue to maintain our positive stance on Tata Steel and recommend Buy on the stock with a target price of Rs 510," says Angel Broking research report.

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