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Tata Steel is expanding its capacity by 2.9mn tonnes in Jamshedpur through
brownfield expansion. The project is expected to be commissioned by the end of
FY2012E. From FY2013E, the proportion of sales volume from India, which is a
high-margin centre, is expected to increase substantially, thereby leading to
significant earnings accretion. We expect sales volume to register a 15.6% CAGR
over FY2011-13E.
Tata Steel is in the process of developing a coking coal mine in Mozambique and an
iron ore mine in Canada to enhance Tata Steel Europe's (TSE) raw-material integration
levels. The projects are expected to be commissioned by October 2011 with lower
offtake initially; full benefit is expected to accrue in FY2013E. However, we have not
factored the savings in our estimates, indicating an upside to our target price.
The company has undertaken various cost-reduction initiatives and restructuring
measures at TSE, which would lead to savings of US$375mn annually. We expect
the current normalised EBITDA/tonne of US$50 at TSE to increase to US$75 on the
back of these initiatives in FY2013E.
The stock is currently trading at inexpensive valuations of 5.7x FY2012E and 4.8x
FY2013E EV/EBITDA. On a P/B basis, the stock trades at 1.0x FY2012E and 0.9x
FY2013E earnings. We maintain our Buy view with a taget price of `614 .
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Steel is expanding its capacity by 2.9mn tonnes in Jamshedpur through
brownfield expansion. The project is expected to be commissioned by the end of
FY2012E. From FY2013E, the proportion of sales volume from India, which is a
high-margin centre, is expected to increase substantially, thereby leading to
significant earnings accretion. We expect sales volume to register a 15.6% CAGR
over FY2011-13E.
Tata Steel is in the process of developing a coking coal mine in Mozambique and an
iron ore mine in Canada to enhance Tata Steel Europe's (TSE) raw-material integration
levels. The projects are expected to be commissioned by October 2011 with lower
offtake initially; full benefit is expected to accrue in FY2013E. However, we have not
factored the savings in our estimates, indicating an upside to our target price.
The company has undertaken various cost-reduction initiatives and restructuring
measures at TSE, which would lead to savings of US$375mn annually. We expect
the current normalised EBITDA/tonne of US$50 at TSE to increase to US$75 on the
back of these initiatives in FY2013E.
The stock is currently trading at inexpensive valuations of 5.7x FY2012E and 4.8x
FY2013E EV/EBITDA. On a P/B basis, the stock trades at 1.0x FY2012E and 0.9x
FY2013E earnings. We maintain our Buy view with a taget price of `614 .
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