Upgraded Tata Steel to 'buy'- TP Rs.489 - Geojit BNP Paribas Financial Services

- Tata Steel is upgraded to buy with a target price of Rs.489 over one year.

- At the current price of Rs.396 range, the stock is traded close to its trough case valuation and the risk- reward ratio looks attractive.

- The stock is expected to overturn the de-rating driven by 2HFY12 policy easing in Europe and China.

- Current stock price implying almost zero FY13 EBITDA margins for Corus, the downside seems very limited.

- The target price of Rs.489 is arrived at by assuming FY13 EBITDA of USD 28/ ton against FY08-12 EBITDA average of USD40/ton.

- Policy easing in Europe and ramp up of India expansion and Pt Talbot rebuild would reverse last month's de-rating. Production ramp up at Jamshedpur / Benga projects and re-build of Pt Talbot are near term triggers.

- Delays in projects and further decline in Corus margins are major risks to the target price.

Source : Equity Bulls

Keywords