Stock Market View For Today

Posted on March 28th, 2008 in Personal Finance) by Motilal Oswal Securities Ltd |

Todays Market View : POSITIVE BIAS 

Expect the markets to open positive in line with other Asian marketsOpen interest positions extremely light with total open interest at Rs41200 and Futures open interest at Rs34400 cr.

We met the management of Tata Steel and came back very positive on the stock . Reierate a strong buy for investments for the following reasons

Indian operations: We see upsides to our estimates driven by
1) 1.3m tons incremental hot metal production vs our estimate of 1m ton in FY09.
2) Price increase of US$200/ton coupled with savings of Rs5-6b.
3) Swapping of Yen denominated debt eliminates risk of hedging losses due to currency movements.
- Corus: Our EBITDA estimates are in-line with the guidance. We are not concerned on pension liability of Corus due to available surpluses. If company is able to acquire some iron ore projects within one year, there will be substantial savings in iron ore costs.
- Our current EPS estimates are Rs82.8 in FY08 and Rs114.3 in FY09. Stock trades at FY09 EV/EBITDA of 4.3x FY09, PE of 5.7x FY09, and EV/ton of US$777, a substantial discount to global peers. We also believe that the current pricing environment could lead to significant upgrades to our earnings estimates. If we incorporate the higher volume estimates, realisations and cost savings in Indian operations, consolidated FY09 EPS of Tata Steel works out to Rs136.3. On these estimates, stock trades at FY09 EV/EBITDA of 3.7x and PE of 4.8x.

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