THE SHARE PRICE OF TATA STEEL IS DEFINITELY OVERPRICED LOOKING AT ITS PERFORMANCE, GLOBAL INDUSTRY SITUAION, HISTORICAL INVESTMENT PARAMETRS AND COMPARISON WITH SAIL. STEEL IS A CAPITAL INTENSIVE INDUSTRY AND THE BEST PARAMETER IS EV/EBITDA. HISTORICALLY THE EV/EBITDA OF TATA STEEL NEVER CROSSED 6.5.,THE HIGHEST WAS IN JULY 08 BASED ON JULY SHARE PRICE AND ANNUALISED EBITDA FOR 2008-09 ON JUNE 08 Q WHICH CAME TO 6.2. THE EBITDA FOR JUNE 09 WAS 27334M AND SHARE PRICE 673, NET DEBT OF 175567M, THIS RATIO DROPPED TO 2.9 ON 31-10-08, 3.1 IN JAN 09 AND 5.5 AT APRIL 09 END. THE QUARTERLY EBITDA IN RSM WERE 30759 IN SEP 09, 13596 IN DEC 08, 22728 IN MARSH 09, FULL YEAR EBITDA WAS 94417 AND AT A PRICE OF 388 ON 26-6-09 THE RATIO WAS 5.7. NOW WE COME TO JUNE 09 WHEN EBITDA DROPPED TO 17886M AND THE RATIO WENT TO 8.0, AT END SEP 09 Q THE EBITDA WENT UP MARGINAALY TO 19983M BUT AT THE SAME TIME NO OF SHARES WERE ALSO HIGHER AT 887M FROM 731M AT JUNE 09 END, EBITDA WAS UP BY 12 % BUT SHARES UP BY 21 %. THE EBITDA FOR FIRST 6 MONTHS THIS YEAR IS 37869M AGAINST 58093M OF LAST YEAR. IF WETAKE THE BEST CASE THAT EBITDA FOR FULL CURRENT YEAR WILL BE ABOUT THE SAME AS LAST YEAY(WHICH IS HIGHLY DOUBTFUL AS THE CO WILL HAVE TO HAVE EBITDA OF 56548M IN THE NEXT 6 MONTHS)BUT LET US CONSIDER THE BEST CASE, THE NET DEBT AS OF SEP 09 WAS 242360M AND IT IS ASSUMED TO BE AT THIS LEVEL AT MRACH 2010. BASED ON THIS AND TAKING CURRENT PRICE OF 575, THE ENTERPRISE VALUE COMES TO 753 BILLION AND EV/EBITDA OF 8.0. WHICH IS VERY MUCH ON A HIGHER SIDE. THE SHARE PRICE EVEN IF EBITDA FOR FULL YEAR IS 95BILLION RUPEES, WILL BE 370 IF THE RATIO IS 6. AT 7 THE SHARE PRICE IMPROVES TO 476 AND THE FAIR PRICE ON 6.5 RATIO COMES TO 424. THE GLOBAL STEEL SCENE GOING FORWARD IS NOT VERY ENCOURAGING THOUGH BETTER THAN THE FIRST 6 MONTHS . RECEMNTLY DUE TO GLOBAL STEEL SCENS, THE COMPANIES IN INDIA HAVE REDUCED THE STEEL PRICES, WHICH IS NOT AN ENCOURAGING SIGN. ALL THIS WORKING OF TATA STEEL IS ON A STANDALONE BASIS AND THE POSITION WORSENS IF WE TAKE THE EBITDA ON A CONSOLISTED BASIS AND NET DEBT AT ALSO ON THE SAME BASOS. . LAST YEAR ON A CONSOLIDATED BASIS NET PRFIT OF TATA STEEL IN JUNE 09 Q WAS 39B RUPEES WHICH CAME DOWN TO MINUS 22 B IN JUNE 09. SEP 09 WILL BE OUT ON 26-11-09 BUT IS LIKELY TO BE NEGATIVE AGAIN. AS COMPARED TO TATA STEEL , THE EV/EBITDA OF SAIL LAST YEAR WAS 5.2 AND SAIL HAS A NET CASH POSITION. THE QUARTELY RATIOS OF SAIL FROM JUNE 08 WERE 3.3 IN JUNE 08, 1.2 IN SEP 08, 1.9 IN DEC 08 AND 5.2 IN MARCH 09, 6.3 IN JUNE 09 AND 5.4 IN SEP 09. HENCE ON A PEER BASIS ALSOTATA STEEL RATIO IS VERY HIGH AND FAIR ONE SHOULD BE AROUND 6.5 IN THE BEST CASE. THE INVESTORS ARE ADVISED TO CAREFULLY CONSIDER THIS AND THEN TAKE THE DECISION TO BUY OR SELL TATA STEEL
Dear corous would run at full capacity by march 2010. this is the statement by tatasteel md and the share prices are increasing because of better performance in second half of FY 2010
as of now the stock seems to be simply moving with the nifty...do u think there`ll be a sharp correction after agm???...this wud be d rite time to exit???
| NIFTY 
