(My Original Blog Post: -*http://www.onlineequitycalls.com/2008/12/tata-steel-an-outperformer-hdfc-securities/)
HDFC Securities has maintained an outperformer rating on Tata Steel in its December 4, 2008 research report. "TSL revenues increased by 36.2% YoY to Rs 442 billion. Net profit grew by a whopping 213% YoY to Rs 47.7 billion. After Corus acquisition, Tata Steel’s raw material security was reduced to 17% while financial leverage increased to 1.65x, which are built into its discounted valuations. Further, due to volatility in steel prices and increasing demand concerns from industrial consumers, we are revising our FY09E and FY10E EPS by 9% and 18% downwards to Rs.103 and Rs.78 respectively."
"In the current quarter, the full impact of falling steel prices was not captured. However, 50-60% of Corus contracts for iron ore will be renegotiated in January 09 at lower prices, which will help ease margin pressures. Thus, we maintain our Outperfomer rating on the stock. At the CMP, the stock is trading at a PE of 1.6x FY09E and 2.1x FY10E EPS," says HDFC Securities' research report.