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Tata Steel's 1QFY12 ebitda at Rs-- (+--% yoy) was --% above our expectations. We cut out TP
from Rs-- to Rs-- as we roll-forward our valuations. The increasing uncertainty in the international
steel markets due to macro pressues overwiegh the robust Indian operations. Downgrade to
HOLD.
1QFY12 results – Better than expectations
Tata Steel reported ebitda/t of US$--- (+--% yoy and --% qoq) at its Indian operations vs RBS est.
of US$--/t. The international operations reported Ebitda/t of US$-- (+--% yoy and --% qoq) vs RBS
est. of US$--/t. Helped by price revisions for contract customers, earnings were better than
expected. 2 more points on recent results.
Outlook increasingly getting uncertain especially at international operations
76% of revenues and --% ebitda of Tata Steel is contributed by its international operations of
which 74% is contributed by UK and the EU regions. On a read-through from the recent Arcelor
Mittal earnings guidance which talks of a 30-40% drop in 3QCY12 steel business ebitda, we
believe that earnings from this segment are most vulnerable in the current economic environment
and could witness significant volatility.
Tata Steel now most expensive among peers. Downgrade to HOLD.
Tata Steel is better placed compared to the last down-turn due to i) 1.02bn of equity raising ii)
capacity closures in UK and iii) timely India expansion. However, on the flip side i) an elevated
raw material price scenario and ii) high sensitivity of European operations to volumes are likely to
put pressure on margins. We have lowered our FY12/13 European volume estimates by --/--%.
As a result we cut our FY12/13 ebitda estimates by --/--%. We roll-forward our valuation to FY13
and introduce FY14 estimates. We downgrade Tata Steel to HOLD from BUY earlier and lower
target price to Rs470 as re-adjust earnings multiples in-line with its peers.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Steel's 1QFY12 ebitda at Rs-- (+--% yoy) was --% above our expectations. We cut out TP
from Rs-- to Rs-- as we roll-forward our valuations. The increasing uncertainty in the international
steel markets due to macro pressues overwiegh the robust Indian operations. Downgrade to
HOLD.
1QFY12 results – Better than expectations
Tata Steel reported ebitda/t of US$--- (+--% yoy and --% qoq) at its Indian operations vs RBS est.
of US$--/t. The international operations reported Ebitda/t of US$-- (+--% yoy and --% qoq) vs RBS
est. of US$--/t. Helped by price revisions for contract customers, earnings were better than
expected. 2 more points on recent results.
Outlook increasingly getting uncertain especially at international operations
76% of revenues and --% ebitda of Tata Steel is contributed by its international operations of
which 74% is contributed by UK and the EU regions. On a read-through from the recent Arcelor
Mittal earnings guidance which talks of a 30-40% drop in 3QCY12 steel business ebitda, we
believe that earnings from this segment are most vulnerable in the current economic environment
and could witness significant volatility.
Tata Steel now most expensive among peers. Downgrade to HOLD.
Tata Steel is better placed compared to the last down-turn due to i) 1.02bn of equity raising ii)
capacity closures in UK and iii) timely India expansion. However, on the flip side i) an elevated
raw material price scenario and ii) high sensitivity of European operations to volumes are likely to
put pressure on margins. We have lowered our FY12/13 European volume estimates by --/--%.
As a result we cut our FY12/13 ebitda estimates by --/--%. We roll-forward our valuation to FY13
and introduce FY14 estimates. We downgrade Tata Steel to HOLD from BUY earlier and lower
target price to Rs470 as re-adjust earnings multiples in-line with its peers.
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