Buy Tata Steel; target of Rs 835: Prabhudas Lilladher

Prabhudas Lilladher's research report on Tata Steel

Tata Steel (TATA) reported stronger than expected earnings on the back of higher margins in domestic operations. Margins in domestic operations rose to Rs14,000/t (PLe:Rs12,040) on the back of surprisingly lower RM cost. We increase our FY18e/FY19e EBITDA estimates by 6%/9% due to 8%/12% increase in EBITDA/t estimates of Indian operations. We remain extremely positive on the sector given the structural supply controls imposed by Chinese authorities and firm global demand. Positive restructuring of TATA Steel Europe (TSE) and increased focus on Indian operations with a goal to double the capacity (through organic and inorganic route) in next five years makes TATA one of the best candidate to play the strength in steel sector.

Outlook
We reiterate BUY with TP of Rs835, EV/EBITDA 7x FY20E.

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