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NAYAN M. VALA
403-404, Cosmos Court, Above Waman Hari Pethe Jewellers, S.V Road, Vile Parle (W), Mumbai – 400056.
Share & Stock Broker
Tata Steel Ltd.
Long Term Buy
Industry Company PE Last Dividend Market Cap. Steel 7.7 X 130% Rs.27,129 Cr. CMP Book Value Equity
Target (Rs 650)
52Wk High/Low Rs. 745/329 Rs. 490 Rs. 176.2 Rs.553.7 Cr.
Steel Cycle yet not over and prices appear to have stabilised: Global steel demand is expected to remain strong in 2006-07 due to strong demand from China, US and EU. Despite a marginal increase in supply; strong global demand and increasing consolidation in the industry will keep the prices stable. Higher input prices will also force the producers to keep prices higher. As per Cris Infac estimates prices in 2007 HR prices are expected to be around $500 per tonne a shade higher than around $480/tonne in 2006. On the domestic front an expected 8% GDP growth will keep the steel demand high. The growth drivers like large investment in retail, realty (construction) on the back of rising spend will ultimately result in higher steel consumption. Infrastructure sector will consume a large quantum of longs, while automobile and industrial sector will drive demand for flat steel products. Considering all these demand factors domestic prices too are expected to remain strong despite increased capacities.
Well-diversified business mix &branding efforts fetch better realisations:
Tata Steel's products include hot and cold rolled coils and sheets, galvanised sheets, tubes, wire rods, construction re-bars, rings and bearings. The products are targeted at automobiles, white goods, construction and infrastructure markets. In an effort to de-commoditise steel, the company
Tata Steel Ltd. -13rd Nov, 2006 CODE NO. 23/00528/13
MEMBER: THE NATIONAL STOCK EXCHANGE OF INDIA LTD.
Some early initiatives are: − Tata Steel undertook its first major overseas investment in NatSteel Asia. having trading offices at Chicago.com NAYAN M. In addition to this the company has a strong hold in several end user industries such as automobile. Hong Kong. -2- 3rd Nov. Colombo.nayanmvala. which will give it a manufacturing footprint in the Asia Pacific region. Mumbai – 400056. Iran. Ukraine. 23/00528/13 MEMBER: THE NATIONAL STOCK EXCHANGE OF INDIA LTD. China. Turkey. Saudi Arabia. wire rods and wires. Tata Pipes (pipes for individual house builder and farming segments).Tata Bearings (bearings for original equipment manufacturer and replacement market) and Tata Agrico (agricultural equipment for farming and construction segment).Tata Tata Steeln (re-bars for individual house-builder semi-urban. All these initiatives have increased & protected company’s margins in the fluctuating steel price cycle. Kathmandu. Middle East and Europe. The company has focused on increasing the sale of its branded products and the sales of these products as a proportion of its total sales have shown a constant increase over the last few years. 2006 CODE NO. some of which are: Tata Steel Ltd. Vile Parle (W). Exports constituted 14 per cent of 2006 turnover. Some of the markets targeted by the company included USA. Share & Stock Broker has introduced brands like Tata Wiron (wire rods for farming and fencing segment).vsnl. Tata Steelium (cold rolled steel for auto ancillaries and the general engineering segments) . S. London.in Website: www.26105973 E-Mail: vala@bom3. cold rolled and galvanised products. it currently exports through a group company. VALA 403-404. Johannesburg. While initially the company channeled its exports through its in-house Export Division. Dubai. including China. Tata Steel was one of the pioneers in accessing the export market to improve its sales and realizations. packaging and bearings and is the preferred supplier for many companies in these sectors. Canada. Fax.segment). .V Road. Thailand and Singapore. South and Southeast Asia. Cosmos Court. Above Waman Hari Pethe Jewellers. New York.Telephones 32549230/32448788. Tata International Ltd. The company has also announced the commencement of necessary modalities for other global projects.net.Tata Shaktee (corrugated galvanised sheets for rural house builder segments). construction. The major items of steel export include hot rolled coils and plates. Bangladesh. Global vision: In the recent past Tata Steel has made significant progress in establishing itself on Global platform.
we expect an upside of at least 25% over next 1 year for this stock. . The synergies from operations such as access to large EU market. an Australian firm with expertise in the area of flat steel solutions. Global Cost competitiveness to help maintain margins: Tata Steel Ltd. Post acquisitions the margins of the combine entity are expected to be around 25% (down from Tata Steel’s present EBIDTA margins of 35%). Fax. a large global producer. 23/00528/13 MEMBER: THE NATIONAL STOCK EXCHANGE OF INDIA LTD.vsnl. VALA 403-404. Vile Parle (W).net.Telephones 32549230/32448788. Corus deal: Excellent long term Prospects: Tata Steel has recently announced acquisition of Corus a leading EU based steel major. Australia. The deal will be part equity and Tata Steel will acquire debt to the tune of $5.V Road. − Agreement to buy a 5 per cent interest in the Carborough Downs Coal Project located in Queensland.com NAYAN M. Mumbai – 400056. 2006 CODE NO. access to high value product technology coupled with Tata Steel’s low cost plank could do a lot of good to the combined entity. Considering all these. shipper and trader of high-grade metallurgical coal. the company has entered into a 50:50 joint venture with Bluescope Steel. Thailand to acquire its shares and invest additional equity in Millennium Steel Company a dominant steel producer in Thailand − Joint Venture Agreement with Iranian Mines and Mining Industries Development and Renovation Organisation (IMIDRO) to join them in their proposed steel-making projects and mining operations in Iran. − Similarly. -3- 3rd Nov. This transaction is expected to cost Tata Steel around $10bn and will strain its financials in the short term. S.8bn on Corus’ balance sheet.nayanmvala.in Website: www. Above Waman Hari Pethe Jewellers. Share & Stock Broker − Definitive Agreements signed with Cementhai Holding Company .a 100 per cent subsidiary of the Siam Cement Company.26105973 E-Mail: vala@bom3. With this proposed deal Tata Steel’s size will leapfrog to 25Mn tones and it will become 5th largest steel company in the world. Cosmos Court.
Philippines. along with a concomitant rise in employee productivity through emphasis on training.vsnl. rings.g. tubes. agrico and wires. Vile Parle (W). NatSteel Asia. Continuous improvement in operating efficiency (e. Tata Steel ranked 34th in the world.Telephones 32549230/32448788. BACKGROUND Tata Steel (earlier known as Tata Iron & Steel Company or Tata Steel) was established in 1907. Tata Steel is globally ranked one on cost competitiveness factor. growth shop. 2006 CODE NO. While steel firms across the globe have been affected by rising input costs. the company has been able to leverage on its vertical integration by accessing raw material from its in-house mines and collieries.V Road. bearings. S. VALA 403-404. Mumbai – 400056. Tata Steel’s HR production cost is close to $ 160/tonne against the selling price of $ 500/tonne. lowering of raw material consumption. It represents the country's single largest.com NAYAN M. Rightsizing of its employees. ferro-alloys and minerals as well as cargo handling services. It was ranked first (for the second time) among 23 world class steel companies by World Steel Dynamics in June 2005. Above Waman Hari Pethe Jewellers. Tata Steel Ltd.in Website: www. Fax. Malaysia and Vietnam. With its plant located in Jamshedpur (Jharkhand) and captive iron ore mines and collieries in the vicinity. while its recently acquired Singapore-based company. The company has a wide product portfolio. manufactures 2 MTPA of steel across Singapore.26105973 E-Mail: vala@bom3. coke rate. 23/00528/13 MEMBER: THE NATIONAL STOCK EXCHANGE OF INDIA LTD. which includes flat and long steel. it has now become 5th largest steel producer in the world after the acquisition of Corus. Share & Stock Broker Steel is a capital-intensive industry and hence its profitability is dependent on its operating rates. specific refractory consumption and business process reengineering) have contributed significantly to the improved operating margins of the company. ferro alloys and minerals.nayanmvala. While in terms of size. bearings. The main plant at Jamshedpur manufactures 5 MTPA of flat and long products. Tata Steel has been operating at over 100% capacity in last few years. modernization and automation has helped the company. Apart from the main steel division. integrated steel plant in the private sector.net. Cosmos Court. Tata Steel's operations are grouped under strategic profit centres like tubes. Tata Steel enjoys a distinct competitive advantage. -4- 3rd Nov. . China.
Above Waman Hari Pethe Jewellers.5% Financial Performance: Jun-06 Net Sales Other Income Gross Income Increase/Decrease in Stock Consumption of Raw Materials Staff Cost Total Expenditure (Excluding Other Expenditure) Other Expenditure Total Expenditure Interest Profit(+)/Loss(-) Before Depreciation & Taxes Depreciation Profit(+)/Loss(-)Before Tax Provision for Taxation Net Profit(+)/Loss(-) Face Value of Share (in Rs.net.) 391585 7793 399378 -6989 106239 30340 129590 105709 235299 2929 161150 19514 141636 46295 95341 10 17.vsnl. 23/00528/13 MEMBER: THE NATIONAL STOCK EXCHANGE OF INDIA LTD.62 Sep-05 386510 11879 398389 5556 84893 34118 124567 99682 224249 3071 171069 17551 153518 48976 104542 10 18.nayanmvala.Telephones 32549230/32448788. VALA 403-404.5% FI 19.7 Tata Steel Ltd. . 2006 CODE NO.V Road.) Diluted EPS (in Rs.3 % FII 21.89 Jun-05 346452 3033 349485 -22207 89524 30327 97644 92944 190588 3415 155482 17064 138418 46007 92411 10 16. Vile Parle (W). Share & Stock Broker QUARTERLY FINANCIAL PERFORMANCE (in Crores) Shareholding Pattern: Public 28. Fax. Cosmos Court.7% Promoters 30. S.com NAYAN M.26105973 E-Mail: vala@bom3. -5- 3rd Nov. Mumbai – 400056.23 Mar-06 412897 6436 419333 16071 110832 37252 164155 115223 279378 1715 138240 19327 118913 40602 78311 10 14.15 Dec-05 368080 4128 372208 -9911 99106 33604 122799 109051 231850 3643 136715 23568 113147 37773 75374 10 13.in Website: www.
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