Tata Steel : Price : Rs757

Tata Steel reported FY08 adjusted consolidated net profit of Rs62.7bn which was below our estimates by 5%. Consolidated net sales stood at Rs1315.4bn with consolidated EBITDA at Rs180bn marginally below expectation. The company reported EBITDA margin of 13.7% which was below our expectation of 15.4% mainly on account of lower EBITDA margin at Corus. Corus reported EBITDA margin of 9.1% which was below our expectation of 12.8%. The margins at Corus were below our estimates on higher than expected cost push. The consolidated reported net profit stood at Rs123.5bn which, adjusting for one time items of Rs60.7bn that brings the net profit to Rs62.7bn. During 4QFY08, Corus settled its iron ore and coking coal contracts at 65% and 215% hike respectively. Against that, it announced price hike of USD160t and USD208/t for its automotive contracts. It has also announced significant price hikes in other products (sold in spot market) in the range of USD100/t to USD200/t in addition to hikes announced in 3QFY08. We do not change our estimates of FDEPS of Rs108.3 for FY09 and maintain BUY on stock with target price of Rs1083 (10x FY09 FDEPS)