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Brownfield expansion on track: Tata Steel's 2.9mn tonne
brownfield expansion programme is on track and expected to
be commissioned by 2HFY2012. The product mix constitutes
2.5mn tonne of HRC and 0.3mn tonne of slabs. We expect this
expansion to contribute over `4,000cr from FY2013.
Higher integration levels for TSE to boost earnings: Tata Steel is
in the process of developing a coking coal mine in Mozambique
and an iron ore mine in Canada to enhance TSE's raw-material
integration levels. The projects are expected to be commissioned
by 2HFY2012 with lower offtake initially; the full benefit is
expected to accrue in FY2013E. We have not factored the savings
in our estimates, indicating an upside to our target price.
Leverage ratios to improve: With higher contribution to
profitability from integrated Indian operations, we expect a
gradual decline in debt-equity ratio and increase in interest
coverage ratio from FY2013E.
Outlook and valuation: We expect Tata Steel's India operations
to benefit significantly on account of firm steel prices; however,
TSE would continue to suffer because of higher raw-material
prices and subdued demand in Europe.
Nevertheless, we continue to maintain our positive stance on
Tata Steel owing to its buoyant business outlook, driven by
a) higher sales volume in FY2013 on completion of its 2.9mn
tonne brownfield expansion project in Jamshedpur, b) rawmaterial
projects at Mozambique and Canada and c)
restructuring initiatives at TSE. We maintain our Buy
recommendation on the stock with an SOTP target price of `799.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Brownfield expansion on track: Tata Steel's 2.9mn tonne
brownfield expansion programme is on track and expected to
be commissioned by 2HFY2012. The product mix constitutes
2.5mn tonne of HRC and 0.3mn tonne of slabs. We expect this
expansion to contribute over `4,000cr from FY2013.
Higher integration levels for TSE to boost earnings: Tata Steel is
in the process of developing a coking coal mine in Mozambique
and an iron ore mine in Canada to enhance TSE's raw-material
integration levels. The projects are expected to be commissioned
by 2HFY2012 with lower offtake initially; the full benefit is
expected to accrue in FY2013E. We have not factored the savings
in our estimates, indicating an upside to our target price.
Leverage ratios to improve: With higher contribution to
profitability from integrated Indian operations, we expect a
gradual decline in debt-equity ratio and increase in interest
coverage ratio from FY2013E.
Outlook and valuation: We expect Tata Steel's India operations
to benefit significantly on account of firm steel prices; however,
TSE would continue to suffer because of higher raw-material
prices and subdued demand in Europe.
Nevertheless, we continue to maintain our positive stance on
Tata Steel owing to its buoyant business outlook, driven by
a) higher sales volume in FY2013 on completion of its 2.9mn
tonne brownfield expansion project in Jamshedpur, b) rawmaterial
projects at Mozambique and Canada and c)
restructuring initiatives at TSE. We maintain our Buy
recommendation on the stock with an SOTP target price of `799.
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