MUMBAI: Angel Broking has maintained its Buy rating on Tata Steel with a target price of Rs 875.
A report released on August 29 said: "We upgrade our earnings estimates for FY2009 by around 20% on account of the better-than-expected 1QFY2009 results, better realisation from Corus and lower tax rate of 20-22% guided by the management. We have marginally upgraded the earnings estimates for FY2010 by 1.4%.
"At the CMP of Rs 600, Tata Steel is trading at a P/E of 5.2x and EV/EBIDTA of 4.2x FY2010E consolidated earnings. We believe that the stock is quoting at attractive valuations considering the better-than-expected performance by Corus, higher synergistic benefits (US $600mn, earlier US $450mn), strong prices in the European markets, diversified markets and scale of operations. However, the biggest risks to our assumptions are correction in the global prices and consequently Corus’ ability to pass on additional costs to consumers in the medium term and no change in the government’s restrictive attitude towards steel prices. We maintain a Buy on the stock with a target price of Rs 875."
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