Buy Tata Steel; target of Rs 443: Angel Broking

Angel Broking is bullish on Tata Steel and has recommended buy rating on the stock with a target of Rs 443 in its February 13, 2013 research report.

“Tata Steel’s Indian operations posted a net sales growth of 12.8percent yoy to Rs9,370cr led by higher volumes. However EBITDA fell by 1.1percent yoy to Rs2,526cr and EBITDA margin slipped 379bp yoy due to higher costs of raw material, power and staff costs. Interest and depreciation charges increased by 152.0percent and 50.1percent yoy to Rs509cr and Rs434cr, and as a result the company’s standalone PAT fell by 26.4percent yoy to Rs1,046cr.”

“The company’s consolidated net sales fell by 3.0percent yoy to Rs32,107cr due to weak financial performance from Tata Steel Europe (TSE) where volumes declined by 9.9percent yoy to 3.0mn tonne; EBITDA/tonne was US$(26) for TSE. The interest cost in the quarter increased by 46.0percent yoy to Rs1,032cr and depreciation increased by 25.7percent yoy to Rs1,463cr. Hence, the company reported an adjusted net loss of Rs743cr at the consolidated level.”

“Despite weak 3QFY2013 results, we maintain our positive stance on Tata Steel owing to its buoyant business outlook, driven by a) higher sales volume in FY2014-15 on the back of 2.9mn tonne brownfield expansion project in Jamshedpur, b) raw-material projects at Mozambique and Canada and c) restructuring initiatives at TSE. We maintain our buy rating on the stock with a revised SOTP target price of Rs443,” says Angel Broking research report.

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