-------- Forwarded Message --------
Subject: Tata Steel: Worst Is Over ?
Date: Fri, 6 Nov 2015 09:08:43 +0530
From: Asis Ghosh <asis...@gmail.com>
Reply-To: asis...@gmail.com
Q2FY16 result beats estimates helped by other income
223-210 might be good accumulation zone for 280-315 in the near term
*CMP: 225*
*
*
*Buy around: 223-213-210*
*TGT: 245-262-280 (1-3M)*
**
*TGT: 300-315 & 350-388 (12-24M)*
*TSL< 205
*
*Note: Consecutive closing below 205 for any reason, TS can fall up to
199-195, which is again a good buying zone with TSL<185. Sustain below
185, TS may further fall to 175-155 zone. For strength, TS needs to
trade above 223-228 for an immediate target of 245 and above.
*
*Some key takeaways & rationale:
*
Standalone Q2FY16 PAT at Rs.2523 cr against expectations of 2310;
QOQ-1249; YOY-2476.
OP at Rs.1862 cr with OPM at 19.5% against estimate of 1655 with 18.8%.
Q2 EPS at 25.53 against QOQ-12.41 & YOY-25.04
Consolidated Q2FY16 PAT at Rs.1529 cr against consensus of 851; QOQ-763;
YOY-1254.
Q2 consolidated EPS at 15.31 against QOQ-7.42 & YOY-12.46
OP at Rs.1830 cr down nearly 50% YOY with OPM at 6.2% (down by 4%).
*Although as par company's release, OPM from operations before
exceptional items & tax is around Rs.2349 cr against QOQ-1092 & YOY-1302. *
In Q2, other income of TS stood at around Rs.2938 cr against Rs.321 cr
YOY. This OI includes gain of Rs.2808 cr on sale of quoted investments.
In September'15, TS sold around 3.80 lacs Tata Motors shares to Tata
Sons for Rs.1250 cr through an off-market transactions @330 per share.
*This other income and selling of quoted investments are already known
factors as par the company's strategy to sell non-core assets to prune
its massive balance sheet debts (Rs.80903 cr as on Q2FY16).
*
*In Q2, TS reduced its debt by Rs.2903 cr (pre-payment) and consolidated
finance costs dropped by almost 15% (YOY).*
Clearly, TS's EU operations hurt the company although there is some
apparent silver lining in its domestic operations. EU operation was hurt
by sharp deterioration in conditions there, specially in UK amid strong
currency (GBP). Also there was sharp increase in imports from
China/CIS/SAFTA countries amid their respective weaker currency, So, in
that sense, TS may be a victim of global currency war & cross currency
headwinds.
UK is another country in G-6, which was supposed to lift off soon or
after Fed. But yesterday's BOE statement is more dovish than the market
thought and it seems that BOE will only act after the Fed move.
Thus, we may see downward pressure in GBP in the near term and that may
also help TS to some extent.
Domestic operations was helped by better value added product mix,
specially in automobiles steel sector. But relatively strong INR and
cheap imports from China & other FTA countries like Japan & Korea are
hurting India operations to some extent amid subdued manufacturing
activity. Overall slow demand is also neutralizing the impact of higher
import duty for steel industry in India.
Looking ahead, the management of TS is hopeful that various reform
policies undertaken by our Govt will manifest gradually in the
underlying domestic steel demand over the next few years; i.e. they are
also expecting overall economic recovery and infra boom by FY:17-18.
Also, China and other global slow down fears may be bottoming out and we
may see better demand/supply metrics in the days ahead and worst may be
over for steel industry, including Tata Steel.
*As par BG metrics & current market parameters:*
(standalone TTM & FWD EPS)
*Present median valuation of Tata Steel may be around: 275 (FY:15/TTM)*
*
*
*Projected fair valuations might be around: 295-315-335 (FY:16-18/FWD)*
SCRIP EPS(TTM) BV(Act) P/E(AVG) Low High Median
200-DEMA 10-DEMA
TATASTEEL 55.39 686.39 5 287.84 258.26 273.05 299.16 240.83
TATASTEEL 62.55 730.55 5 305.88 274.44 290.16 299.16 240.83
TATASTEEL 71.55 778.55 5 327.15 293.53 310.34 299.16 240.83
TATASTEEL 81.05 828.95 5 348.19 312.40 330.30 299.16 240.83
*Analytical Charts:*
<http://4.bp.blogspot.com/-VEG6qcSJlLk/VjwbHrrPjYI/AAAAAAAAEwA/WbtIxPns2dw/s1600/TS-05-11-2015.png>
<http://4.bp.blogspot.com/-wIflIb9rNwY/VjwbIxRR6bI/AAAAAAAAEwI/XwbHIAls1zc/s1600/TS-FIBB-05-11-2015.png>
<http://4.bp.blogspot.com/-rD4cHWQgdec/VjwbKkoSdPI/AAAAAAAAEwQ/JK-dKwkQfYU/s1600/TS-WK-05-11-2015.png>
<http://3.bp.blogspot.com/-1ymLYfaV1XY/VjwbLtLbcUI/AAAAAAAAEwY/9RYXQN9g_kI/s1600/TS-PATTERN-05-11-2015.png>
<http://3.bp.blogspot.com/-YERKDqWRx-U/VjwbP61nC5I/AAAAAAAAEwg/1h4NL-cRi1o/s1600/TS-TL-RSI-05-11-2015.png>
<http://2.bp.blogspot.com/-Va6ycCQ3Ktw/VjwbSvMewJI/AAAAAAAAEwo/q6a8cqdfmJA/s1600/TS-TL-05-22-2015.png>
--
Thanks & Regards,
Asis Ghosh
(asisghosh.blogspot.in)
NCFM-TA Certified
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