Thursday, May 26, 2011

Tata Steel FY 11 Results & Valuation

Tata Steel registered full-year (April-March) consolidated net profit of Rs 8,983 crore compared with a net loss of Rs 2,009 crore last year on back of higher volumes, improved product-mix and higher realisations. The profit was also boosted by a one-time gains of Rs 2,091 crore from sales of Teesside Cast Products in February 2010.Total income of the company rose to Rs 1.19 lakh crore from Rs 1.03 lakh crore.
At the CMP of Rs. 572 the company commands a Market cap of approx Rs. 55,000 crores which is half the consolidated sales revenue reported by the company.

Based on PE multiple the stock is trading at the current year multiples of around 6 including exceptional income while it is trading at a PE of 7.9 if we exclude the one time income from the sale of Teeside Cast products.
The stock is currently trading at attractive valuations and can give descent return from the current levels. But investors should be cautious as globally the commodity prices are falling, and if the steel prices falls significantly from the current levels the future performance of the company will be badly affected as the company is in pure play commodity business.

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