Emkay Research has maintained a buy rating on Tata Steel, with a target of Rs 1085 in its March 18, 2008 research report. "At the CMP of Rs 659 the stock is trading at 6.1x FY09E FDEPS of Rs108.5 and at 5.4x EV/EBITDA. We believe that with the recent hikes in steel prices and expected hikes in the prices the company will pass on the incremental costs. The hikes in prices were primarily on account of high demand and increasing raw material costs, with contract iron ore prices settled with a hike of 65% yoy. Post settlement of the coking coal contracts, the steel prices are expected to increase further. We have factored in a hike of 65% for iron ore in FY09 and a 100% hike in coking coal prices for FY09".
"We have fine tuned the target price to Rs 1085 to account for the hike in iron ore and steel prices and expected hike in coking coal and scrap prices. We maintain a BUY on the stock with a target price of Rs 1085 which is 10x FY09 FDEPS of Rs 108.5" says Emkay Research.
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