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Metals & Mining: Tata Steel (TISC.BO, Buy, on our Conviction List)
• In our view, the current price does not reflect Tata Steel’s strong growth trajectory (46% FY10-FY13E EBITDA CAGR) and improving return
profile, driven by robust profitability at India operations (70% of FY11E EBITDA) and sustainable recovery at Tata Steel Europe. At current price
levels, the negatives, if any, are more than priced in, and the market is assigning unjustifiably low (negative) value to the European business
• On earnings-based multiples, the stock is trading at 4.5X FY12E EV/EBITDA, at 26% discount to mid-cycle of 6.2X and 20% discount to peers
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